Washington, D.C. — The value added by the private construction industry as a percentage of gross domestic product (GDP) increased in 30 states and decreased in only six in 2015, according to a report by Associated Builders and Contractors (ABC). Nationally, construction’s direct contribution to GDP increased by 0.1 percent to 3.9 percent from 2014 to 2015.
“Construction continued to play a vital role in the U.S. economy in 2015, increasing its percentage contribution to GDP nationally and in 30 states,” said economist Bernard M. Markstein, Ph.D., president and chief economist of Markstein Advisors, who conducted the analysis for ABC. “The industry continues to experience growth following the Great Recession, led by investment in lodging, office, manufacturing and multifamily construction. The recovery is being led by consumers who have benefited from improved job markets, increased income and low energy prices and who are spending their increases in disposable income.”
Construction accounted the highest percentage of state GDP in North Dakota, with 7.6 percent in 2015, compared to a low of 3.1 percent in Connecticut and New York. Six states — Arizona, North Dakota, Mississippi, Oregon, West Virginia and Wyoming — saw a decrease in construction’s percentage of GDP from 2014.
Top five states
In 2015, the top five states for the value added from construction as a percentage of state GDP in order from highest to lowest were:
1. North Dakota
North Dakota’s construction industry supplied the largest share of state GDP for the fifth year in a row, although its share dropped to 7.6 percent in 2015 from 7.7 percent in 2014. Hawaii’s construction industry made the second largest contribution to state GDP at 5.9 percent with an increase of 0.5 percent from 2014, the largest year-over-year improvement of any state. Montana’s construction industry accounted for 5.8 percent of state GDP and construction’s portion of GDP has remained above 5.5 percent dating back to the beginning of the data series in 1997. Wyoming saw the largest drop in percentage of GDP from construction investment from 2014 (0.3 percent) but still had the fourth largest ratio at 5.7 percent. Construction’s contribution to Louisiana’s GDP remained unchanged from 2014 at 5.5 percent, dropping the state from the second highest ratio to fifth.
Bottom four states
In 2015, the bottom four states for the value added from construction as a percentage of state GDP in order from highest to lowest were:
49. Connecticut and New York (tie)
Connecticut and New York’s construction industries shared the lowest contribution of state GDP for the third year in a row at 3.1 percent. Delaware experienced the third lowest share of state GDP from construction at 3.2 percent. Oregon’s construction industry accounted for the fourth lowest contribution to GDP. The fifth lowest was a tie among six states — California, Illinois, New Hampshire, New Mexico, North Carolina and Ohio — at 3.4 percent.
Background on construction and the economy
Construction has always played a vital role in the nation’s economy despite some ups and downs. From 1999 through 2015, real (inflation-adjusted) construction investment (both residential and nonresidential) varied from 5.1 percent of real gross domestic product (GDP) in 2010 and 2011 to 9.4 percent of GDP in 1999. In 2014 and 2015, construction investment was 6 percent of GDP. These numbers cover a wider range of construction’s impact on the economy than the more narrowly defined value added from private construction. Thus, the percentages are higher than those from the value-added data.
These figures represent the direct impact of construction investment. However, there are additional benefits from purchases related to, but not directly included in, construction projects, such as equipment for a new factory, furniture for an office or residential property, and appliances for commercial and residential units. Further, the workers employed in construction through spending their income stimulate other parts of the economy. Based on reasonably conservative estimates, these additional purchases add at least 2 percent to 3 percent to the impact of construction activity on the economy.
Read the full report on ABC's website at http://www.abc.org/NewsMedia/ConstructionEconomics/StatebyStateConstructionEconomics/tabid/7497/entryid/7541/the-importance-of-construction-to-state-economies-2015-gdp-update.aspx.