Real nonresidential fixed investment, however, declined 2.2 percent after increasing 3.6 percent in the second.
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Construction is 2.1% undervalued with nonresidential real estate construction down 21.7% year over year.
The GDP return on residential assets is only 7%, compared with 48% for nonresidential assets.
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Private nonresidential construction is up 12.7% in the past year, and lodging construction (hotels) has surged 51%.
Household spending has flattened out, investment in nonresidential structures is still weak, and the housing sector remains depressed.
Nonresidential structures decreased 4.4 percent, in contrast to an increase of 0.6 percent.
Commercial, industrial and other nonresidential builders have also seen some margins strengthen slightly.
It is clear that something has gone wrong with the way that the economy builds its stock of nonresidential assets.
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Meanwhile construction of new hotels, roads, offices and factories-the nonresidential projects that account for 90% of United's business-is likely to improve.
Real nonresidential fixed investment decreased 1.3 percent in the third quarter, in contrast to an increase of 3.6 percent in the second.
Nonresidential builders posted a 14.3 percent gain over the last 12 months.
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He thinks new nonresidential construction activity will progress much more slowly and unevenly this year, offering less demand for workers than residential.
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The U.S. economy produces a reliable 48% GDP return on nonresidential assets.
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The revisions offset each other, continuing the recent pattern in which the slowdown in housing is being offset by the pickup in nonresidential construction.
Nonresidential construction is expected to grow 11% this year, says Reed.
Importantly, it is nonresidential assets that drive employment, productivity, and wages.
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Investment in nonresidential structures (such as office buildings, factories, and retail space) should also continue to expand, although not at the unusually rapid pace of 2006.
Business spending on equipment and software, the FOMC said, has risen significantly, though investment in nonresidential structures is declining and employers remain reluctant to add to payrolls.
Negative drivers were negative contributions from private inventory investment, federal government spending and exports, partially offset by personal consumption expenditures, nonresidential fixed investment and residential fixed investment.
The BEA numbers show that the economy is not doing as good a job of converting gross investment into net increases in nonresidential assets as it used to.
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Meanwhile, it says that business spending on equipment and software is rising, though notes that investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls.
Manufacturing and commercial construction projects have been some of the biggest drivers of nonresidential construction over the last year, according to the Associated General Contractors of America, a trade group.
Even homebuilding is done with nonresidential assets (e.g, tools).
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Nevertheless, nonresidential construction companies have been a major contributor to the overall industry growth in the last year or so, according to an analysis of private-company financial statements by Sageworks Inc.
Hundreds of billions of dollars worth of precious capital was diverted from nonresidential assets (which produce a 48% GDP return and support jobs) to residential assets (which return 7% and create no jobs).
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What has happened is that an increasingly uncompetitive corporate tax rate has suppressed nonresidential investment as a percent of GDP, and our unstable dollar has caused much capital investment to be misdirected and wasted.
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Nonresidential construction companies analyzed by Sageworks posted an average sales increase of about 10 percent in 2011, marking the sixth year out of the last seven in which nonresidential builders outperformed privately held residential builders.
We note that nonresidential construction, even with the jump in the second quarter, is still near its all-time low relative to GDP, so gains there should continue, given the high levels of liquidity in the economy.
Productive jobs exist because of nonresidential assets.
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