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August Construction Starts up 22% from July

0 289 Market Intelligence

Reed Construction Data (RCD) announced today that the year-to-date value of construction starts through August, excluding residential contracts, totaled $177.8 billion, 4.8% more than in the same months of 2009. Individual month of August starts were 22.4% higher than in July, but 2.8% below last August.

Reed Construction Data (RCD) announced today that the year-to-date value of construction starts through August, excluding residential contracts, totaled $177.8 billion, 4.8% more than in the same months of 2009. Individual month of August starts were 22.4% higher than in July, but 2.8% below last August.

August is a seasonally strong month for construction starts so the seasonally-adjusted monthly gain from July was about 5%. This gain was entirely in non-residential buildings, since heavy construction starts fell slightly after seasonal adjustment.

This is the first significant seasonally-adjusted gain since early in 2010. August starts were slightly above the last pre-recession report in August 2008. Heavy starts are one-third higher than two years ago while non-residential building starts are one-quarter lower than two years ago. Starts are expected to be steady-to-slightly-up over the rest of 2010 and then rise more quickly in 2011.

The value of construction starts each month is summarized from RCD’s database of all active construction projects in the United States, excluding single-family homes. Missing project values are estimated using RSMeans’ building cost models.

Construction starts trends lag the overall economy. Therefore, the summer slowdown in economic growth is not yet fully reflected in the monthly starts. However, the impact later this year will be small, since much of the economic slowdown is in the housing market.

The economic environment for construction improved slightly in August, but not back to the spring level. Compared to spring, the housing market and consumer confidence are marginally weaker. Factory production, inventory re-stocking and machinery investment gains are weaker than in the spring, but remain positive. The inflation and credit cost environment has improved slightly.

The private economy continues to expand, although at a slower pace, but the public economy is collapsing with the ebbing of federal fiscal stimulus efforts which were mistakenly directed at supporting public rather than private employment. The recovery remains fragile, but the risk of a double dip recession is only 25% to 30%.

The largest August gains were $1 billion for offices, highways and healthcare. The largest August decline came in the retail category.

Value of United States Construction Starts — August 2010
(Reed Construction Data)

  Jan-Aug
2010
(millions)
% Change
(Jan-Aug 10 vs
Jan-Aug 09)
  Jan-Aug
2010
(millions)
% Change
(Jan-Aug 10 vs
Jan-Aug 09)
Hotel/Motel $3,899 10.6%   Government Office $3,149 24.3%
Retail $10,197 2.0%   Laboratory $2,076 -11.4%
Parking Garage $1,161 15.5%   Warehouse $1,083 -34.8%
Amusement $4,953 27.0%   Misc. Commercial $3,413 -29.5%
Private Office $6,470 -14.4%  
COMMERCIAL $36,401 -2.6%

INDUSTRIAL (Manufacturing) $2,099 1.0%

Religious $1,463 -4.7%   Police/Courthouse/Prison $4,948 31.7%
Hospital/Clinic $13,241 7.0%   Military $4,328 125.5%
Nursing/Assisted Living $2,052 1.1%   School/College $35,613 0.6%
Library/Museum $1,886 -11.2%   Misc. Government $4,564 7.3%
INSTITUTIONAL $68,095 7.4%  

Misc. Non-residential $1,450 -16.2%
NON-RESIDENTIAL BUILDING $108,045 3.3%

Airport $1,926 -19.2%   Dam/Marine $1,581 -10.0%
Road/Highway $28,507 6.1%   Water/Sewage $19,233 35.0%
Bridge $8,390 -9.4%   Misc. Civil $10,110 -4.7%
HEAVY ENGINEERING $69,747 7.1%

TOTAL NON-RESIDENTIAL $177,792 4.8%

Source: Reed Construction Data (RCD) and Property & Portfolio Research (PPR) (www.ppr.info).
Table: Reed Construction Data – CanaData.

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by JIm Haughey

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