"The variety of data released today provides a kaleidoscopic view of construction rather than the usual snapshot," said Kenneth D. Simonson, Chief Economist for Associated General Contractors of America (AGC), the nation's leading construction trade association. "The overall picture is bright for the moment, with a brilliant housing sector, darkness on the private nonresidential side, and fuzziness in the public sector."
Simonson was assessing data this morning from the Census Bureau on the value of construction put in place in September, along with the October employment report from the Bureau of Labor Statistics (BLS), personal consumption from the Bureau of Economic Analysis (BEA), and the Institute for Supply Management (ISM)'s manufacturing indexes.
"The total value of construction put in place in September, $837 billion seasonally adjusted at annual rate, was 0.6% above the upwardly revised August figure and 0.1% above the September 2001 number. For the first nine months of this year, construction is 0.3% above the total for January through September of 2001. However, there are significant differences by sector," Simonson said. "Private residential and public construction are each running nearly 7% ahead of last year's first nine months but private nonresidential construction is down by 17% so far this year. This category has fallen for five straight months and is now at a six-year low.
Simonson said he expects the divergence between housing and nonresidential construction to continue. "There is plenty of reason to remain optimistic about single-family home building. Earlier today, BLS reported that seasonally adjusted employment among general building contractors rose by 8,000 in October, while 'heavy construction except building' lost 5,000 jobs, and special trade contractors shed 30,000 jobs. BLS pinpointed electrical work as the source for 'a large part' of the decline. The sharp drop in mortgage rates reported yesterday by Freddie Mac (to 6.13% for 30-year loans, from 6.31% last week) and the favorable reports on new- and existing-home sales, building permits and starts all suggest that housing will continue to cruise.
"For the year to date, multi-family housing has actually outstripped single-family, with the former growing by 12% in value put in place compared to the first nine months of 2001, and single-family growing by 5%. However, the boom in single-family housing is likely to come at the expense of multi-family as renters find single-family homes more affordable to own.
Turning to private nonresidential construction, Simonson said, "Today's report from the ISM that manufacturing fell again in October suggests that factory, warehouse, office and business travel-related construction are a long way from recovering. And news from BEA this morning that personal consumption expenditures plunged 0.4% from August to September raises doubt about the prospects for retail construction."
Simonson concluded, "The outlook for public construction-and for passage of terrorism insurance legislation that could revive some private building-depends heavily on Tuesday's election. Besides the issue of who will control the next Congress-and even this month's lame-duck session, which may finally pass a terrorism insurance bill and must set a level for highway and other construction for the rest of the fiscal year-there are a huge number of construction bond issues and several important state and local tax issues on the ballots."
