ConstructConnect’s April Starts +14%, A Bit Better than Usual Seasonal Uptick

Article source: ConstructConnect

ConstructConnect announced today that April’s volume of construction starts, excluding residential activity, was $42.5 billion. The latest month-to-month change was +14.3%. Moving from March to April usually accounts for the biggest gain due to seasonality. The long-term average increase in starts between the third and fourth months of the year has been +12.0%.

April of this year versus the same month of last year was -5.0%. April of this year versus the five-year average for April, from 2013 through 2017, however, was a much better +28.8%.

April 2018’s year-to-date performance was -15%. Still, that was an improvement over March’s first-reported pull-back of -22%. The year-to-date percentage changes early in 2018 are being held down by Q1 2017’s exceptional strength in starts. This effect will gradually dissipate.

The starts figures throughout this report are not seasonally adjusted (NSA). Nor are they altered for inflation. They are expressed in what are termed ‘current’ as opposed to ‘constant’ dollars.

View this information as an infographic.

‘Nonresidential building’ plus ‘engineering/civil’ work accounts for a larger share of total construction than residential activity. The former’s combined proportion of total put-in-place construction in the Census Bureau’s February report was 56%; the latter’s share was 44%.

ConstructConnect’s construction starts are leading indicators for the Census Bureau’s capital investment or put-in-place series. Also, the reporting period for starts (i.e., April 2018) is one month ahead of the reporting period for the investment series (i.e., March 2018.)

Total employment in the U.S. construction sector improved by +17,000 jobs in April, according to the latest Employment Situation report from the Bureau of Labor Statistics (BLS). The average monthly climb in hiring in construction to date this year has been +26,000, slightly faster than the +24,000 increase that was realized from January through April of last year. As for the jobless rate in the sector, it was April 2017 with the better (i.e., lower) level of 6.3% than April 2018, 6.5%.

While total employment in the U.S. is presently +1.6% year over year, construction firms are hiring at a rate that is more than twice as speedy, +3.7%. No other industry in the economy is adding to payrolls as quickly. Transportation and warehousing is in second place, at +3.0%.

Within overall construction, the year-over-year number of jobs undertaking residential work is currently +5.1%. The comparable figures for nonresidential building and heavy engineering are +3.1% and +1.%. The Employment Situation report provides jobs data on three other industrial subsectors with close ties to construction. Year-over-year staffing is +3.6% at building material supply stores, +2.1% in real estate and +2.7% with architectural and engineering services firms.

The +14.3% rise in total nonresidential starts month to month (m/m) in April was thanks to a groundswell of commercial work (+43.3%), with institutional (+32.4%) and industrial (+28.3%) also making solid contributions. But heavy engineering projects failed to make headway (-5.4%). There were groundbreakings on several large engineering projects in the latest month. But collectively, they could not match March’s $5.5 billion Atlantic Coast Pipeline.

The -5.0% figure for total nonresidential starts in April 2018 relative to April 2017 (y/y) resulted from declines in industrial (-51.2%), commercial (-24.9%) and institutional (-11.0%) that could not be overcome by a more than one-quarter burst in heavy engineering (+26.3%).

The sources of the -15.4% year-to-date (i.e., ytd = Jan-Apr 2018 vs Jan-Apr 2017) decline in total nonresidential starts were industrial (-60.1%), commercial (-32.9%) and institutional (-13.3%). The only construction subcategory to fight back was heavy engineering/civil (+9.0%).

The major contributors to heavy engineering starts so far in 2018 have been the ‘road/highway’ and ‘miscellaneous civil’ subcategories, with shares of 35% and 28% respectively. The former in April was -0.3% m/m, +20.0% y/y and +5.9% ytd while the latter was -34.2% m/m, +72.8% y/y and +111.1% ytd. April’ Top 10 had the Mountain Valley Pipeline start for $3. billion.

The ‘school/college’ subcategory has accounted for more than half (a 58% slice) of total institutional starts to date in 2018. Such educational facility starts in April were +21.8% m/m; +3.8% y/y; but -4.9% ytd. The ‘hospital/clinic’ and ‘nursing/assisted living’ subcategories, with shares of 13% and 10%, have accounted for the next largest portions of institutional through April of this year. In the latest month, ‘hospital/clinic’ starts impressed at +195.4% m/m, but were -33.5% y/y and -28.7% ytd. ‘Nursing/assisted living’ starts fluctuated from +33.9% m/m to -32.9% y/y, but on a ytd basis, they settled on neutrality, with virtually no change, -0.4%.

The largest shares of total commercial in the first third of this year were provided by the ‘private office’ (a 24% or nearly one-quarter slice), ‘hotel/motel’ (an 18% slice) and ‘retail/shopping’ (a 15% slice) subcategories (15%). ‘Private office’ starts in April were upbeat m/m (+66.2%), but were considerably less rosy both y/y (-13.6%) and ytd (-32.1%). ‘Hotel/motel’ starts displayed a similar pattern: +59.3% m/m, but -45.5% y/y and -45.2% ytd. As for ‘retail/shopping’ starts in April, they were uniformly beleaguered: -16.7% m/m; -23.3% y/y; and -20.4% ytd.

The six graphs show 12-month moving-average trend lines of starts for many of the major type-of-construction subcategories. Except for ‘schools/colleges’, the curves for all the nonresidential building subcategories have been sloping downwards for a while. The tale has been different for the engineering subcategories, however, with ‘roads/highways’ and ‘bridges’ appearing more robust, and the trend line for ‘miscellaneous civil’ launching into orbit.

Tables B-3 and B-8 of the monthly Employment Situation report record average hourly and average weekly wages for industry sectors. B-3 is for all employees (i.e., including bosses) on nonfarm payrolls; B-8 is for ‘production and nonsupervisory personnel’ only (i.e., it excludes bosses). For April in both tables, and across all industries, average hourly wages were +2.6% y/y and average weekly wages were +2.9%. Beating the +3.0% benchmark stayed just out of reach.
Compensation rates for construction workers, though, were much better. From Table B-3, the gains were +3.5% for average hourly earnings and +4.1% for average weekly earnings. From Table B-8 (excluding supervisors), they were even healthier at +3.9% hourly and +4.7% weekly.

The value of construction starts each month is summarized from ConstructConnect’s database of all active construction projects in the U.S. Missing project values are estimated with the help of RSMeans’ building cost models.

ConstructConnect’s nonresidential construction starts series, because it is comprised of total-value estimates for individual projects, some of which are ultra-large, has a history of being more volatile than many other leading indicators for the economy.

ConstructConnect has now moved to a better-targeted and research-assigned ‘start’ date. Prior to January 2017, the ‘start’ date was recorded as occurring within 30 to 60 days of the announced bid date. In concept, a ‘start’ is equivalent to ground being broken for a project to proceed. If work is abandoned or re-bid, the ‘start’ date is revised to reflect the new information.

Click here to download the Construction Industry Snapshot Package – April 2018 PDF.

Click here for the Top 10 Project Starts in the U.S. – April 2018.

Click here for the Nonresidential Construction Starts Trend Graphs – April 2018.

TABLE 1: VALUE OF UNITED STATES
CONSTRUCTION STARTS – APRIL 2018
(CONSTRUCTCONNECT)

Source: ConstructConnect Research Group and ConstructConnect.
Table: ConstructConnect.

TABLE 2: VALUE OF UNITED STATES
CONSTRUCTION STARTS
CONSTRUCTCONNECT INSIGHT VERSION – APRIL 2018
Arranged to match the alphabetical category drop-down menus in INSIGHT

Table 1 conforms to the type-of-structure ordering adopted by many firms and organizations in the industry. Specifically, it breaks nonresidential building into ICI work (i.e., industrial, commercial and institutional), since each has its own set of economic and demographic drivers. Table 2 presents an alternative, perhaps more user-friendly and intuitive type-of-structure ordering that matches how the data appears in ConstructConnect’s on-line product ‘Insight’.

Source: ConstructConnect.
Table: ConstructConnect.

TABLE 3: VALUE OF UNITED STATES NATIONAL CONSTRUCTION STARTS – APRIL 2018 – CONSTRUCTCONNECT
Billions of current $s, not seasonally adjusted (NSA)

Data Source and Table: ConstructConnect.

TABLE 4: U.S. YEAR-TO-DATE REGIONAL STARTS NONRESIDENTIAL CONSTRUCTION* — CONSTRUCTCONNECT

*Figures above are comprised of nonres building and engineering (i.e., residential is omitted).

Data Source and Table: ConstructConnect.

Tags: AEC, Alex Carrick, architect, construct, ConstructConnect, Construction, Construction services, Growth, market, oil, real estate, residential

Category: ConstructConnect

This entry was posted on Tuesday, May 15th, 2018 at 3:17 pm. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.