The value of new construction starts decreased 9% in October at a seasonally adjusted annual rate, following a 14% jump in September, Dodge Data & Analytics reported on Tuesday. "Over the past two months the pattern for total construction starts was shaped by nonresidential building, which fell 30% in October after soaring 37% in September. Although nonresidential building in October did include the start of several very large projects, led by the $1.1 billion new ballpark for the Texas Rangers in Arlington, Texas, they were not the same magnitude as the three exceptionally large projects entered as September starts....Residential building in October slipped 1%, due to a slower pace for multifamily housing. Running counter was a sharp 27% increase for nonbuilding construction, which was lifted by the start of the $3.0 billion expansion of the Atlantic Sunrise natural gas pipeline in Pennsylvania and Virginia. For the first 10 months of 2017, total construction starts on an unadjusted basis were...up 1% from the same period a year ago. The year-to-date gain for total construction was restrained by a 38% drop for the electric utility/gas plant category. If the electric utility/gas plant category is excluded, total construction starts during the first 10 months of 2017 would be up 4% relative to the same period a year ago."
Recent construction cost movements have been mixed. Consultancy IHS Markit and the Procurement Executives Group (PEG) reported on Wednesday, "Construction costs rose again in November. The current headline [index] registered 60.2, supported by strong figures in both the materials/equipment and labor sub-indexes." The index is on a scale from 0 to 100 in which a reading higher than 50 represents upward pricing strength; below 50, downward pressure, "The materials/equipment price index was 60.9 in November, moving up from the October figure of 58.9. Price increases were widespread. Every category in the materials index showed higher prices with the exception of two [ocean freight] categories [that] showed no change in prices. Downstream materials such as transformers continued to post higher index figures, reflective of price increases in raw materials filtering to downstream products. In addition, raw materials such as copper and structural steel continued to post higher index figures relative to last month. Current subcontractor labor prices rose at a fast pace in November: the index figure came in at 58.5, the highest reading since December 2014....'Subcontractor rates continued to accelerate over November and expectations for future increases reached a five-year high,' said Emily Crowley, principal economist - pricing and purchasing, IHS Markit. 'Tightening labor market conditions combined with an uptick in activity are driving expectations of future rate increases. Currently the U.S. South and West are having the most trouble finding workers leading to stronger wage escalation.'" In contrast, New South Construction Supply reported in its November newsletter on Wednesday, "As in October, there were few price changes for the major lines of products we distribute, although several manufacturers announced future price increases."
"States increased capital spending by an estimated 5.7% in fiscal 2017, 3.1% in fiscal 2016 and by 4.2% in fiscal 2015," the National Association of State Budget Officers reported in its annual State Expenditure Report on November 16. (The fiscal year for most states ends on June 30.) "The percentage spending increase in estimated fiscal 2017 was the largest since 2006 when total capital spending increased by 9.9%. Most of the relatively sharp increase in fiscal 2017 was in the transportation area reflecting the devotion of additional resources to address the significant need for maintenance and infrastructure spending." These results are in line with comments by highway contractors and state highway officials, many of whom report that activity has increased. But Census Bureau totals for all state and local construction put in place show a 4% decrease in the year ending June 2017 from the previous 12 months, including changes of -2% for highway and street construction and -4% for transportation (air, 4%; land, -7%; and water, -15%). The NASBO definition of capital spending includes "land purchases and the acquisition of major equipment and existing structures," which are excluded from the Census definition, but that difference does not seem sufficient to explain the difference in direction as well as magnitude.
"The rate at which renters moved in 2017 was at a historic low of 21.7%, compared to 35.2% in 1988," Census reported on November 15. "However, renters still moved at a higher rate than owners (21.7% compared with 5.5%, respectively)." When households stay put, there is less demand for both residential construction and related nonresidential construction.
"Real gross domestic product (GDP) increased in 48 states and the District of Columbia in the second quarter [Q2] of 2017," the Bureau of Economic Analysis reported on Tuesday. Real GDP by state "is the market value of goods and services produced by the labor and property located in a state." Construction on net subtracted 0.09 percentage points from overall growth of 2.8% in Q2. Construction's contribution ranged from 0.66 percentage points in Nevada to -0.49 points in Alaska.
"By the end of the third quarter, 701 hotels/82,484 rooms had already opened in the U.S. with another 278 projects/29,532 rooms forecast to open by year-end," consultancy Lodging Econometrics reported on November 15. "The total 2017 forecast is 979 projects/112,016 rooms, representing a 12% increase over the actual number of hotel openings in 2016. [The firm] forecasts that 1,146 projects/130,633 rooms will open in 2018 and another 1,153 projects/134,990 rooms will open in 2019," implying that lodging construction will increase again in 2018 but level off by 2019.