Construction spending totaled $1.180 trillion at a seasonally adjusted annual rate in January, a decrease of 1.0% from the December rate but a 3.1% year-over-year (y/y) gain from the January 2016 rate, the Census Bureau reported on Wednesday. Private residential spending in January increased 0.5% for the month and 5.9% y/y. New multifamily construction increased 9.0% y/y; new single-family construction rose 2.3% y/y; and residential improvements rose 11% y/y. Private nonresidential spending was unchanged from December but climbed 8.9% y/y. By subsegment, in descending order of January size, power (electric power plus oil and gas pipelines and field structures) increased 5.8% y/y; manufacturing skidded 6.9% y/y; commercial (retail, warehouse and farm) added 12% y/y; office jumped 34% y/y; and health care rose 8.1% y/. Public construction tumbled 5.0% for the month and 9.0% y/y. Of the three largest public components, highway and street construction plummeted 10% y/y; educational construction climbed 1.8% y/y; and transportation (transit, passenger rail, ports and airports) plunged 12% y/y.
The value of nonresidential construction starts decreased 11% y/y, not seasonally adjusted, from January 2016 to January 2017, data provider ConstructConnect reported on Tuesday. Nonresidential building starts (66% of the total) slumped 9.4% y/y. Commercial building starts plunged 19% y/y; institutional building starts gained 3.5% y/y; and the small industrial building starts segment fell 9.2% y/y. Heavy engineering (civil) starts (34% of the total) declined 15% y/y.
Data-center construction is not broken out by Census or ConstructConnect but appears to be doing well, although possibly at risk of overbuilding. "Hyper-scale cloud providers' hunger for server capacity in top US data center markets over the last few years has created a shortage of supply, but, according to a new market report by the real estate brokerage CBRE, that tightness may ease up this year, as developers complete construction projects started in 2016," the e-newsletter Data Center Knowledge reported on Saturday. "Unclaimed data center space that's commissioned and ready for servers to be moved in is extremely tight in major US markets at the moment. According to CBRE, the vacancy rate is 4.6%. However, a whole lot of new speculative development is underway and due for delivery this year. In other words, developers are building a lot of data center space without leases signed ahead of time. By CBRE's estimate, 271MW [megawatts] of capacity is currently under construction in major markets. More than 160MW of it is being built speculatively. Most of the construction is happening in Northern Virginia (121 MW). A lot of construction is also taking place in Dallas-Fort Worth and Silicon Valley, among other markets."
"Reports from all 12 Federal Reserve districts indicated that the economy expanded at a modest to moderate pace from early January through mid-February," the Fed reported on Wednesday in the latest "Beige Book" (named for the color of its cover), a summary of informal soundings of businesses in each district. "Home construction and sales continued to expand modestly in most districts, while residential rental markets were mixed....Commercial real estate construction grew modestly...A number of districts noted that shortages of skilled workers—particularly engineers and IT workers—were driving up their wages, and there were also some reports of labor shortages in the leisure and hospitality, construction and manufacturing industries....prices for construction materials climbed in a number of districts."
The Congressional Budget Office on Wednesday posted a blog post discussing spending on infrastructure and investment that amplified testimony that CBO's director gave at the beginning of February. "Almost all spending on transportation, drinking water, and wastewater infrastructure is done by the public sector. Federal, state, and local governments spent $416 billion on it in 2014. That amount equaled about 2.4% of gross domestic product, a percentage that has been fairly stable for roughly 30 years. The largest amount of public infrastructure spending in 2014 went to highways ($165 billion), followed by water utilities and mass transit and rail. About a quarter of the $416 billion (roughly $100 billion) came from the federal government, and three-quarters (a little over $300 billion) came from state and local governments. Of the federal spending, roughly two-thirds paid for new, improved, or rehabilitated structures and equipment. State and local governments spent money on those things as well, but a much larger proportion of their spending paid for the operation and maintenance of infrastructure. Furthermore, state and local governments pay for most of the facilities that schools require." The article also discusses and includes links regarding three questions: How could the federal government encourage more efficient use and financing of infrastructure? How is funding for highway infrastructure provided, and what are some alternatives? If policymakers wanted to encourage private investment in infrastructure, how could they do that?
McKinsey Global Institute (MGI), the research arm of consultancy McKinsey & Company, posted an article and issued a report on Tuesday on Reinventing Construction: A Route to Higher Productivity. "The report examines the root causes of poor productivity growth in construction and outlines seven practical levers for change. It finds that acting in these seven areas could boost productivity by 50 to 60% globally....If construction-sector productivity were to catch up with that of the total economy—and it can—this would boost the sector's value added by an estimated $1.6 trillion, adding about 2% to the global economy, or the equivalent of meeting about half of the world's infrastructure need....One-third of the opportunity is in the United States." MGI senior fellow Jan Mischke discussed the report with Michigan State University professor Dale Belman and AGC chief economist Ken Simonson in a recorded webinar that day, hosted by the National Association for Business Economics.