Evidence that nonresidential construction
remains robust came from Reed Construction Data, which reported on May 14 that
the January-April value of nonresidential construction starts from Reed’s
database was 22% higher than in the same months of 2006.
Evidence that nonresidential construction remains
robust came from Reed Construction Data, which reported on May 14 that the
January-April value of nonresidential construction starts
from Reed’s database was 22% higher than in the same months of 2006. Nonresidential
building starts jumped 23% and heavy engineering rose 18% “in spite of weak
growth in highway construction and paving…Commercial starts in April were the
second highest ever reported, below only January 2007. Institutional starts in
April were the third highest ever reported. Hotels and offices continue to be
the fastest-growing commercial sectors…Education has replaced healthcare as the
fastest expanding institutional sector, although the small nursing-home market
is still expanding rapidly.”
Reed also reported manufacturing construction
starts leaped 61%. Adding to a long list of recent factory projects,
Paccar announced on May 11 that it would build a $400 million truck engine
plant in Columbus, MS.The Federal Reserve reported on Wednesday
thatindustrial production(IP) in manufacturing gained 0.5%
in April, following an increase of 0.6% in March, and 1.9% from April 2006.IP
for construction supplies rose 0.4% in April and 1.2% in March but was
down 2.1% from April 2006. Capacity utilization in manufacturing, which,
in combination with rising IP, can indicate the need for additional plant
construction, was 80.2% of capacity in April, up from 80% in March and above
the long-term average of 79.8%.
New privately ownedhousing startsin
April increased 2.5% from March at a seasonally adjusted annual rate but fell
16% compared to April 2006, the Census Bureau reported on Wednesday.
Single-family starts were up 1.6% for the month but down 19% year-over-year;
multifamily, up 6.3% and down 7.6%.Building permits,
which are generally a reliable indicator of near-term construction, tumbled
8.9% for the month and 28% year-over-year, with single-family permits down 6%
and 29% and multifamily permits down 16% and 26%. The National Association of
Home Builders reported on Tuesday, “Ongoing concerns about subprime-related
problems in the mortgage market caused builder confidence about the state of
housing demand to [return] to the lowest level in its current cycle, which was
previously hit in September 2006.”
Seasonally adjusted nonfarm payrollemployment by
stateincreased in 26 states and the District of Columbia in April,
decreased in 22 states and was unchanged in South Dakota and Vermont, the
Bureau of Labor Statistics (BLS) reported on Friday. From April 2006 to April
2007, employment increased everywhere except in Ohio (-0.2%) and Michigan
(-1%). The biggest year-over-year percentage gains were in Utah, 4.6%; Arizona
and Louisiana, 3.8% each; Wyoming, 3.6%; and Montana, 3.2%.Nationally,
employment rose by only 88,000 in April, half the previous month’s total, as
construction employment went from a large gain in March to a drop in all five
residential and nonresidential segments in April. Year-over-year, national
employment was up 1.4%; construction was down 0.2%. Construction employment
increased in April in only 20 states, fell in 22 plus DC, and was unchanged (or
within 100 of the March level) in eight. Year-over-year, construction
employment climbed in 35 states, fell in 12 plus DC, and was within 100 of the
April 2006 level in New Mexico, Vermont and Virginia. The largest percentage
gains in construction were in Utah, 15%; Montana, 12%; Wyoming, 8%; Hawaii,
Mississippi and Tennesse, 6% each. The steepest drops were in Delaware,
Massachusetts and New Hampshire, -3% each; and Michigan, -7%. Given the
national totals (residential, -2.8%; nonresidential +4%), it is likely most of
the declines are in residential construction, but this level of detail is not
available at the state level.
On May 14, the Fed released its quarterly survey of senior
bank loan officers, conducted in April. Of 53 respondents from U.S. banks, 18
said they had tightenedcommercial real estate lending standards“somewhat;” two had eased standards somewhat. None had tightened or eased
“considerably.” The Fed said this was “a somewhat larger net fraction than in
the previous survey…As in the January survey, 35% of domestic respondents noted
that they had experienced weaker demand for such loans over the same period. By
contrast, the vast majority of [the 15 subsidiaries of] foreign respondents
reported that lending standards on commercial real estate loans had remained
basically unchanged in the April survey. Demand for such loans at these
institutions was also said to be essentially unchanged over the past three
months.” About half of the domestic lenders said they had tightenedstandards
on subprime or nontraditional mortgages. “A large majority of
respondents indicated thatstandards on prime residential mortgageshad remained basically unchanged over the past three months, with 15% reporting
somewhat tighter standards…Tighter standards on subprime and nontraditional
mortgage loans generally were not associated with a move toward more-stringent
lending policies for prime mortgages…On net, about one-fifth of domestic
institutions indicated that they had seen weaker demand for each of the three
categories of residential mortgages-prime, nontraditional, and subprime-over
the past three months.”
The Data DIGest is a weekly summary of economic
news; items most relevant to construction are in italics. All rights reserved.
Reed, Fed, NAHB Data Reveal Nonres Strength, Housing Woes; State Jobs Data Are Mixed
Looking for a reprint of this article?
From high-res PDFs to custom plaques, order your copy today!