AGC Of America Data DIGest: Vol. 15, No. 47--December 21-23, 2015
On Friday, President Obama signed legislation that sets spending levels and limitations for federal agencies for fiscal year (FY) 2016, ending next September, and that extends and amends a variety of tax provisions. An AGC analysis of direct federal spending by agency shows "an increase of approximately $8 billion" from FY 2015 for accounts that cover construction. The act "fully funds the authorized levels contained in the recently-enacted FAST Act [authorizing highway, transit and Amtrak programs], resulting in a 5.5% increase in highway funding and a 10% increase in transit funding over FY 2015 levels." The act cuts FY 2016 funding levels by 4% combined for the Clean Water and Drinking Water State Revolving Funds, much shallower cuts than in the earlier, separate House and Senate bills for these programs. An AGC analysis of the tax provisions shows many items that support construction, including extension and phase-out of wind and solar energy production tax credits, permanent extension of a 15-year write-off period for leasehold and restaurant improvements, and renewal and phase-out of "bonus" depreciation for equipment purchases and the deduction for energy-efficient investments in commercial buildings.
The value of new construction starts in November decreased 5% from October's level at a seasonally adjusted annual rate, Dodge Data & Analytics reported on December 20, based on data it collected. "Nonresidential building lost some momentum [-13%] following its improved October pace. Decreased activity [-2%] was also reported for housing in November, while the nonbuilding construction sector (public works and electric utilities/gas plants) held steady. During the first eleven months of 2015, total construction starts on an unadjusted basis were [up 8% year-to-date (YTD).] Nonresidential building was down 8%....Manufacturing plant construction fell 39%..., as petrochemical plant construction has retreated sharply this year following its exceptionally high amount in 2014. The commercial building group was flat..., with gains registered by hotels, up 14%; and stores, up 1%; while modest declines" were reported for office buildings, -4%; garages/service stations, -4%; and warehouses, -5%. The institutional building group slipped 4%..., with decreased activity reported for public buildings, -1%; transportation terminals, -10%; healthcare facilities, -11%; and amusement-related work, -12%. "The educational building category, which is the largest nonresidential building structure type by dollar volume, advanced 2%....Residential building was up 14% [YTD], a stronger rate of increase than the 3% gain reported for the full year 2014. Multifamily housing climbed 17%....Nonbuilding construction jumped 23%..., due primarily to the start of several massive liquefied natural gas terminals in the first half of 2015. The public works group was down 1%, [with] highway and bridge construction, up 13%;" sewer construction, -3%; water supply construction, -5%; river/harbor development, -11%; and miscellaneous public works, -20%.
Consultancy IHS and the Procurement Executives Group (PEG) reported on Monday that "construction costs fell again in December....The headline current IHS PEG Engineering and Construction Cost Index...registered 41.8 this month, down from 43.7 in November [and the lowest reading for 2015]. The headline index remained consistently below the neutral mark [in which a reading higher than 50 represents upward pricing strength; below 50, downward pricing strength] in 2015, indicating that costs have declined throughout the year. The current materials/equipment price index slowed to 37.8, down from 40.5 in November, the lowest level since the survey began four years ago. All underlying material and equipment components showed falling prices except ready-mix concrete, which showed neutral prices. Copper-based wire and cable registered the highest drop compared to last month, moving from 42.5 in November to 27.5 in December. Transformers, fabricated structural steel and exchangers price indexes also retreated relative to November. The subcontractor labor index remained unchanged in December at 51.1. The sub index recorded its lowest level ever in October, and since has remained just above neutral.
On Tuesday, the Census Bureau released state population estimates for July 1, 2015, along with slight revisions for 2010-14. U.S. population totaled 321.4 million, a gain of 0.79% (2.5 million) from July 1, 2014 and similar to the increases in the previous four years. An AGC analysis showed North Dakota was the fastest-growing state for the fourth year in a row (2.3% in 2015 and 2014), followed by Colorado (1.9%, vs. 1.6%, 4th-fastest in 2014), the District of Columbia (1.9%, vs. 1.6%, 6th in 2014), Nevada (1.9%, vs. 1.7%, 3rd in 2014) and Florida (1.8%, vs. 1.6%, also 5th in 2014). The growth rate accelerated the most in Oregon (from 1.1% in 2014 to 1.5% in 2015) and Utah (from 1.4% to 1.7%). Texas again had the largest increase (490,000), followed by Florida (366,000) and California (353,000). Florida added 55,000 more residents than it had in 2014; Washington and Colorado added 17,000 more than in 2014. Population dipped in seven states (up from six in 2014): West Virginia (-0.3%, -4,623 residents), Illinois (-0.2%, -22,194), Vermont (-0.1%, -725), Connecticut (-0.1%, -3,876), Maine (-.07%, -928), Mississippi (-.04%, -1,110) and New Mexico (-0.02%, -456). California had the biggest slowdown in population growth, adding 26,000 fewer residents than in 2014. Population growth rates and changes in them over time can significantly affect demand for various types of construction as well as state and local revenues to fund projects.
"In fall 2015, overall postsecondary enrollments decreased 1.7% from the previous fall," the fourth consecutive year of declines, the National Student Clearinghouse Research Center reported on December 15. "Enrollments decreased among four-year for-profit institutions (-13.7%), two-year public institutions (-2.4%) and four-year private nonprofit institutions (-0.3%). Enrollments increased slightly among four-year public institutions (+0.4%)." Ongoing declines are a negative for construction.