Construction Economics Update

From ABC (Associated Builders & Contractors); Construction Economics

“Construction Spending in May Up 7 Percent from One Year Ago”

Total construction spending in the nation – which includes both residential and nonresidential construction – increased 0.9 percent from April to May and is 7 percent higher from one year ago, according to the July 2 construction spending report from the U.S. Census Bureau. However, nonresidential construction was unchanged in May from the previous month, totaling $562.3 billion.

Eight of sixteen construction subsectors registered gains from April to May….. read the full article at this link:

http://www.abc.org/Hot_Links/ConstructionEconomicsIndex/Spending_July_2012.aspx

From RER (Real Estate Roundtable); Construction Economics

2nd Quarter 2012 Sentiment Index News Release

Commercial Real Estate Mending, But Still Vulnerable to Ongoing Economic, Political Risks, Roundtable Survey Shows

Without Stronger Job Creation, More Stable Policies from Washington, CRE Markets Likely to Bump Along at Low Level, Especially in Non-Gateway Areas

(WASHINGTON D.C.) — Commercial real estate executives participating in The Real Estate Roundtable’s latest quarterly Sentiment Survey generally said market conditions have improved since a year ago, but signaled a lack of confidence in the outlook for the coming year, citing global economic risks, Washington’s ability to deal with looming budget and tax issues, ongoing Euro zone turmoil, and the vast amount of commercial mortgages maturing this year and beyond…. Read full article at this link:

http://www.rer.org/ContentDetails.aspx?id=12241

Construction Economics Article from ABC (Associated Builders & Contractors)

January 3, 2012

Nonresidential Construction Spending Increases 0.9 Percent in November 2011

Summary


Total nonresidential construction spending increased 0.9 percent in November to a seasonally adjusted annual rate of $555.7 billion, according to the Jan. 3 report by the U.S. Commerce Department. However, total nonresidential spending is down 0.1 percent from one year ago. (see graph).

Private nonresidential construction spending was unchanged for the month, but is 4.5 percent higher than November 2010. Public nonresidential construction jumped 1.8 percent in November, but is still down 4.4 percent year-over-year.

Nine of the sixteen nonresidential construction subsectors posted increases in spending for the month, including power, up 5.1 percent; sewage and waste disposal, 3 percent higher; public safety, up 2 percent; health care, 1.9 percent higher; and highway and street construction, up 1.9 percent. Four subsectors experienced increases in spending from one year ago, including manufacturing construction, up 13.3 percent; commercial construction, 11.4 percent higher; power construction, up 6.5 percent; and education-related construction, 3.9 percent higher.

Seven nonresidential construction subsectors had decreases in spending for the month, including conservation and development, down 11.6 percent; communication, 4.9 percent lower; water supply, down 4.3 percent; religious, 4.3 percent lower; and amusement and recreation-related construction, down 3.5 percent. Twelve subsectors are down from November 2010, including conservation and development construction, down 23.3 percent; religious construction, 23.1 percent lower; lodging construction, down 19 percent; water supply construction, 10.6 percent lower; and communication-related construction, down 9.4 percent.

Residential construction spending increased 1.8 percent in November, and rose 2 percent during the last twelve months. Overall, total construction spending – which includes both nonresidential and residential – rose 1.2 percent in for the month, and is 0.5 percent higher than November 2010.

Analysis


“November’s nonresidential construction performance was solid,” said Associated Builders and Contractors Chief Economist Anirban Basu. “The increase in spending was broad-based and encompassed both private and public construction.

“While privately purchased nonresidential construction has been rebounding for quite some time and is up 4.5 percent year over year, publicly-purchased construction has been in general decline,” Basu said. “That changed in November, with public construction up nearly 2 percent, led by increased purchases in the power, health care, office and sewage and waste disposal categories.

“It should be noted that these data are seasonally adjusted, which means they attempt to account for seasonal weather conditions,” said Basu. Because November was unusually mild in much of the nation, the improvement in nonresidential construction spending may at least be partially attributable to weather rather than economic factors.

In addition, December was also unusually temperate, with the implication being that next month’s report may also be positive,” Basu said.

“Despite the recent momentum in nonresidential construction spending, there remain plenty of reasons for concern,” said Basu. “Lending conditions continue to be disciplined and state and local government budgets remain stressed – not a good combination to push the nonresidential construction industry out of the doldrums.”

Construction Economics - perspective of ABC's Chief Economist

From part of an article on ABC's web-site (Associated Builders and Contractors)....

Transition Toward a Private Construction Recovery

Since peaking in October 2008, the value of nonresidential construction put-in-place has declined 26 percent, according to the U.S. Census Bureau. Any signs of recovery in construction spending largely have been in publicly financed segments, such as highways and streets, conservation and development, and water supply. Privately financed activities have continued to tumble with the exception of data centers and energy-related investment.

With state and local government budgets in disarray and with the impact of federal stimulus spending winding down, the expectation is the pending recovery will be led by privately financed activities. Unfortunately, the construction of office space, hotels and shopping centers are not yet positioned for recovery. Vacancy rates in these categories remain too high to be associated with a significant acceleration in construction activity.

Rising materials prices also represent a headwind to construction recovery. For instance, in April, the Architecture Billings Index fell almost three points following several months of relatively good news, perhaps because rising and volatile materials prices are beginning to have a chilling effect on private development. Though Associated Builders and Contractors’ Construction Backlog Indicatorcontinues to show gradual improvement in backlog among firms, progress remains slow. The bottom line: Nonresidential construction should be fairly flat for the balance of 2011.

AGC (Associated General Contractors) reports that construction spending hit an 11-year low in May 2011

..... and that Construction-sector unemployment is down 29% from peak in April 2006.

Two recent articles on AGC’s web-site:

HEADLINE:

Data Digest: Construction spending hits 11-year low; ARRA added jobs, 3 studies find

July 07, 2011

Construction spending in May totaled $753 billion at a seasonally adjusted annual rate, the sixth consecutive monthly decrease (following downward revisions to April and March data that initially both showed increases) and the lowest figure since 1999, the Census Bureau reported on Friday.

Access complete article at this Internet address:

http://news.agc.org/2011/07/07/data-digest-construction-spending-hits-11-year-low-arra-added-jobs-3-studies-find/

HEADLINE:

7/8 Data DIGest: Construction Jobs Dip in June; Reports Vary on Apartment, Office, Data-Center Demand

July 08, 2011

Nonfarm payroll employment rose by only 18,000, seasonally adjusted, in June, and the gains for April and May were pared by a combined 44,000, the Bureau of Labor Statistics (BLS) reported today. The unemployment rate edged up from 9.1% in May to 9.2%, seasonally adjusted (9.3%, not seasonally adjusted). Construction employment totaled 5,513,000, seasonally adjusted, down 9,000 from May, up 2,000 from June 2010 and down 2,213,000 (29%) from the peak in April 2006. The unemployment rate for construction workers was 15.6%, not seasonally adjusted, down from 20.1% in June 2010. (BLS does not report seasonally adjusted rates by industry.) The combination of static employment and falling unemployment suggests that discouraged workers are retiring, going back to school or finding jobs in other industries rather than returning to construction—a bad omen for future industry expansion.

Access complete article at this Internet address:

http://news.agc.org/2011/07/08/78-data-digest-construction-jobs-dip-in-june-reports-vary-on-apartment-office-data-center-demand/

Reed Construction Data's Chief Economist reveals latest outlook on Non-Residential Construction market

On April 1^st, Jim Haughey, Chief Economist at Reed Construction Data, released his latest outlook on the non-residential construction market. Below, you will find a few of his comments, and, below those comments, you’ll find a link to the full article:

Nonresidential: Commercial Environment Continues Mixed

04/01/2011 by Jim Haughey, RCD Chief Economist

Commercial (built to lease) market drivers are balanced among positive, negative and neutral. Office, retail and hotel markets each have one or more positive drivers along with negative and neutral drivers largely due to lingering space surpluses. However, the negative drivers are steadily moving toward neutral. The commercial market remains on a path to a sustained recovery early in 2011. Several long lead indicators have been positive since last fall. The AIA index of design work underway is above 50, which indicates expansion at the pre-start project phase.

There have been some spot rises in commercial starts since last spring but they have not been sustained.

The build vs. buy indicator still points at buy for real estate investors in most markets.

The market drivers for institutional construction are rapidly deteriorating. Federal stimulus funding is ebbing quickly.

Higher education, hospitals, nursing homes and cultural facilities have access to non-taxpayer money and will fare better than K-12 education and public buildings.

Here’s the link to the full article:

http://www.reedconstructiondata.com/construction-forecast/news/2011/04/nonresidential-commercial-environment-continues-mixed/

I encourage you to read the full article; the article contains a number of interesting statistics and trends.

Nonresidential Construction Spending Plummets 6.9 Percent in January

On March 1, 2011, ABC posted an article on its web-site about Construction activity in January 2011.

Here’s the “summary” from that article:

Summary

In a further sign that the nation’s builders continue to struggle after the recession, private nonresidential construction spending fell 6.9 percent in January, according to the March 1 report by the U.S. Commerce Department. Year-over-year, private nonresidential construction spending is down 13.2 percent. Total nonresidential construction spending – which includes both privately and publicly financed construction – was down 3.3 percent in January and 5.3 percent lower from the same time last year, and now stands at $536.7 billion (see graph below).

Here’s a link to the full article on Associated Builders and Contractors (ABC’s) web-site:

http://www.abc.org/Hot_Links/ConstructionEconomicsIndex/Spending_March_2011.aspx

Construction in the U.S. - the new year starts off in a sluggish manner

According to an article posted on AGC of America’s web-site on February 24, 2011, January 2011 “construction starts” decreased on an overall-sector basis. It states in the article that the information is based on data collected and reported by McGraw Hill.

Here’s part of the article I found on AGC of America’s web-site (you’ll find a link, below, the article, so that you can, if you want to, read the full article:

“The value of new construction starts retreated 6% in January” at a seasonally adjusted annual rate, according to McGraw-Hill Construction (MHC), based on data it collected. “The decline came as the result of a pullback for nonresidential building after a strong December, combined with a loss of momentum for residential building. At the same time, the nonbuilding construction sector showed further growth in January on top of its elevated December pace, aided by several large public works projects. On an unadjusted basis, total construction starts in January were…down 4% from the same month a year ago….Nonresidential building in January dropped 13%…, following December’s strong 27% gain. Healthcare facilities in December were lifted by the start of six massive hospital projects, and January showed this category retreating 46% from its exceptional December amount. The healthcare category in January was still 7% above its monthly average for 2010 as a whole….Transportation terminal work in January was also down sharply, falling 75%, compared to a robust December that included the start of a $450 million airport terminal project at Love Field in Dallas. [Residential building] dropped 7% in January after showing modest improvement during the previous five months. Single family housing held steady in January [but there was a] 35% decline for multifamily housing, which retreated after the gains witnessed at the end of 2010….Nonbuilding construction in January advanced 2%….Highway and bridge construction soared 42%, reflecting the lift coming from $1.5 billion for the start of work to add new lanes to the LBJ Freeway in Dallas….Additional perspective can be obtained by looking at 12-month moving totals, in this case the 12 months ending January 2011 versus the 12 months ending January 2010, which lessens the volatility present in one-month comparisons. For the 12 months ending January 2011, total construction was down 2%, due to this pattern by sector – nonresidential building, down 10%; residential building, up 5%; and nonbuilding construction, up 3%.”

This link will take you to the full article:

http://news.agc.org/2011/02/24/construction-starts-architecture-billings-slow-in-january-mhc-aia-report/