Regional Differences in Private Nonresidential Construction Spending

Private nonresidential spending or investment includes a broad variety of structures. At the U.S. level, gains have been greatest in lodging, commercial, office, education, communications, power, and manufacturing, which all recorded double-digit gains from a year earlier.

All four Census Divisions experienced great losses in spending during the 2001 recession. With data through 2005 (the most recent available), we can see that although no region has recovered to its pre-recession peak, the Midwest experienced the smallest average decline in spending growth over 2000-05, thanks mostly to gainsin the West North Central region, not the struggling East North Central, which is mired in auto manufacturing losses. A combination of growth in the healthcare and commercial sectors and the only average positive growth in manufacturing spending (and the smallest average decline in manufacturing employment) of any region helped propel the West North Central region. Because the region has the highest share of manufacturing, it buffered losses in other sectors. Since private nonresidential investment is an indicator of local economic growth, it is not surprising that the Mountain region had the highest nonresidential construction spending and employment growth in 2005. Strong investment in manufacturing, healthcare, commercial, amusement, office, and religious structures has driven spending growth in this region. Employment in the manufacturing sector has also rebounded in a number of states in the Mountain region, particularly Utah, Nevada, Arizona, and Wyoming. This is being reflected in construction investment for manufacturing, which has seen its share of total investment recover. In the South, spending is heavily concentrated in both the office and commercial spending sectors, accounting for 20% and 35%, respectively. In this division, the highest share of office spending comes from the South Atlantic, where states like North Carolina and Virginia have a large concentration in the finance and insurance sector.

The tables below show the highest- and lowest-ranking states in terms of private nonresidential construction spending.

Investment across the states is quite diversified. No one state accounted for even 10% of the United States in 2005—California was closest at 9.4%. Indeed, the impact of Hurricane Katrina, although heavily felt along the Gulf Coast, had only a minimal affect on total U.S. construction spending; the affected states (Alabama, Louisiana, and Mississippi) comprised a little over 3% of total construction spending for the United States in 2004.