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By: Alex Carrick on June 6th, 2017

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2 Leading Monitors of U.S. Construction Activity, 1 Public and 1 Private – Early Summer 2017

Economic News

The percentage levels and changes in Table 1 are based on the Census Bureau’s seasonally-adjusted (SA) April 2017 and earlier put-in-place construction statistics. ‘Put-in-place’ as a concept is meant to mirror work-in-process or progress payments as projects proceed.

2017-06-02-US-Put-in-Place-Apr-2017

For each type-of-structure, Table 1 takes the behind-the-scenes put-in-place data and compares the percentage changes of latest-12-months-over-previous-12-months versus latest-three-months-over-previous-three-months (annualized).

If the three-month percent change exceeds the 12-month percent change, then construction activity in that type-of-structure category is considered to be speeding up. A check mark is entered in the far right column. (If the opposite is occurring, a check mark is entered in the ‘slowing down’ column.)

If a type-of-structure category has a latest 3-month percent-change that is negative, but less negative, than its 12-month percent-change, such a circumstance is also considered to be an instance of ‘speeding up’ and warrants a check mark in the right-hand column. (Or, if it’s turning more negative, then it’s ‘slowing down’ further.)

If the percentage changes for a type-of-structure swing from negative to positive, or vice versa, then it’s obvious where the check mark should go.

While Table 1 shows two of the three main categories speeding up, the majority of subcategories (9 of 16) are slowing down. ‘Residential’ has really heated up in the latest three months (+35.0% versus +6.1%) and that has lifted ‘Total Construction’ (+11.2% versus +3.8%), but ‘Nonresidential’ (-3.1% versus +2.3%) has slipped backwards.

Among nonresidential subcategories, ‘lodging’ (-9.8% versus +18.6%), ‘offices’ (-17.9% versus +23.0%) and ‘commercial/retail’ (-1.3% versus +11.6%) have all seen the brakes applied, followed by shifts into reverse.

‘Health care’ (-6.2% versus +0.6%) has also been backing up, although not to quite the same degree, and ‘educational (0.0% versus +4.3%) has come to a full stop.

Among the remaining subcategories that account for substantial shares of ‘Total Construction’, only ‘transportation’ (+6.2% versus -7.2%) and ‘highways and streets’ (+8.8% versus -2.0%) are making boldly positive statements.

‘Power’ (+1.0% versus +1.6%), which includes projects centered in oil and natural gas as well as in electricity, continues to move forward, but hesitantly.

‘Manufacturing is staging a retreat (-7.7% versus -6.8%) that has managed to stay orderly as opposed to becoming a rout.

Table 1: U.S. Put-in-place Construction Investment − April, 2017
Based on 'current' (i.e., not adjusted for inflation) $s, seasonally adjusted at annual rates (SAAR)

Weighting of type-of-structure category
(% of total $s)
    Year to date
2017/
Year to date
2016
(from monthly averages of SAAR data)
    Latest 12 mons vs. previous 12 mons Latest 3 mons vs. previous 3 mons (annualized) Slowing Down
1 of 3
'Total'
categories /
 9 of 16 subcategories
Speeding Up
2 of 3 'Total'
categories / 
5 of 16 subcategories
       
       
       
       
       
       
Total Construction 100.0%     5.5%     3.8%   11.2%      
Total Residential 42.9%     11.3%     6.1%   35.0%    
Total Nonresidential 57.1%     1.6%     2.3%   -3.1%      
Lodging 2.3%     11.0%     18.6%   -9.8%      
Office 5.9%     17.1%     23.0%   -17.9%      
Commercial (retail) 6.6%     12.6%     11.6%   -1.3%    
Health care 3.3%     1.1%     0.6%   -6.2%      
Educational 7.5%     4.3%     4.3%   0.0%      
Religious 0.3%     -10.0%     -4.7%   -14.6%      
Public safety 0.7%     -0.4%     -5.1%   7.9%      
Amusement and recreation 1.8%     8.8%     8.1%   10.6%      
Transportation 3.4%     -5.9%     -7.2%   6.2%      
Communication 1.7%     9.2%     -2.3%   -8.3%      
Power (electric; oil & gas) 7.7%     1.4%     1.6%   1.0%        
Highway and street 7.4%     -3.3%     -2.0%   8.8%      
Sewage and waste disposal 1.5%     -24.6%     -17.3%   -8.8%      
Water supply 0.9%     -10.8%     -10.4%   -23.0%      
Conservation and development 0.5%     -10.6%     -7.1%   -26.3%      
Manufacturing 5.6%     -8.3%     -6.8%   -7.7%        

In the final two columns, if there is no check mark in the cell, then the type-of-structure category has stayed within 1.0%, up or down.
For December, the year-to-date figure is the same as the 'latest 12 months' figure.

Data source: Census Bureau / Table: ConstructConnect

Graph 1 shows moving 12-month totals of ConstructConnect’s construction starts figures (i.e., the ‘Private Monitor’ in the headline).

For example, the residential, nonresidential building and engineering figures for April 2017 are the sums of their monthly numbers for May 2016 through April 2017.

Worth noting is that December of each year, being the sum of the previous 12 months, is also the annual total.

A positive feature of this methodology is that a rolling forward 12-month total eliminates the effects of seasonality.

Graph 1 highlights how much more severely residential construction was impacted by the Great
Recession and its aftermath (2009 through 2011) than was nonresidential building work.

During the same time frame, engineering/civil construction starts barely felt a twinge.

The 12-month total for residential starts has been climbing out of its deep pit since early-2012, but its level has still not fully returned to where it was in 2006.

The residential subcategory’s trough-to-current-position jump has been slightly over +100%, but a further rise of +40% will be needed to again scale 2006’s ‘peak of Everest’.

Nonresidential building starts have recovered and surpassed their previous pinnacle achieved in 2008, but they’ve lost upward momentum since mid-2016. They’ve been flattening out and in the latest period, they went into a (hopefully temporary) tailspin.

During much of the past 11 years, the curve for engineering/civil starts has been on a gradual upward sloping incline. After faltering somewhat in the second-half of last year, engineering/civil starts have been shooting up more aggressively so far in 2017.

It appears a boost has been provided by public works projects and that’s before the adoption of the much anticipated ‘infrastructure spending package’ promised by the new administration in Washington − although uncertainly persists as to the scope and timing of the financing that will ever become available.

States and local governments, fearing safety issues (e.g., long-in-the-tooth bridges) and aware of crucial needs for new highways and byways, driven by both demographic influences and heightened traffic flows, are taking independent action.

In a time-line representation or visualization, the ‘starts’ series, which are essentially groundbreakings, are ‘leading’ or ‘out-front’ indicators for the construction investment or capital spending ‘put-in-place’ numbers.

Graph 1: ConstructConnect's 12-month Moving Totals* of U.S. Construction Starts
April 2017
Trend-Graphs-12-month-Moving-Totals-Apr-17
*For example, April 2017 is the sum of the monthly numbers for May 2016 through April 2017.
December numbers are the same as the annual total.
Data source: ConstructConnect.
Chart: ConstructConnect.