2 Leading Monitors of U.S. Construction Activity, 1 Public and 1 Private – Fall 2018

Article source: ConstructConnect

In 2017, as calculated by the Census Bureau, total U.S. put-in-place construction activity was +4.5% year over year (y/y), with all the strength coming from residential, +12.2%, since nonresidential work was a little worse than flat, -0.5%. (‘Put-in-place’ as a concept captures work-in-process or progress payments as projects proceed.)

Over the past five years, 2013 through 2017, the annual total of U.S. put-in-place construction has averaged +8.0% y/y, led by exceptional growth in residential, +14.0%, with nonresidential doing okay, +4.5%, but not shattering any records.

The latest data from the Census Bureau, for August 2018, shows year-to-date results (i.e., versus the first eight months of last year) being +5.2% for total; +6.5% for residential; and +4.3% for nonresidential, +4.3%.

It appears a better balance is emerging between a less-rapidly-advancing residential segment of overall construction and a heating-up-somewhat nonresidential component.

Table 1

takes the analysis a step further. It looks at the change in latest-three-months versus prior-three-months (annualized) and compares those findings with latest-12-months versus prior-12-months, not only for residential and nonresidential, but also for 16 sub-categories of nonresidential construction.

A check mark is place in one of the two far-right columns of Table 1, depending on whether spending in the type of structure is speeding up or slowing down. A further explanation of what constitutes ‘speeding up’ or ‘slowing down’ appears in italics several paragraphs down.

Table 1 confirms that residential construction is ‘slowing down’, while nonresidential is ‘speeding up’.

Among the 16 sub-categories of nonresidential, there are the following notable instances of ‘slowing down’: lodging, commercial (i.e., retail, warehouse, etc.), health care, educational, religious and communication.

Moving in the opposite direction (in other words ‘speeding’ up), have been four sub-categories of building work – office; public safety; amusement and recreation; and manufacturing – and six sub-categories of engineering/civil work: transportation; power; highway and street; sewage and waste disposal; water supply; and conservation and development.

Keep in mind that there is a hierarchy among the sub-categories based on their weightings in the ‘total’, as shown in the first column of Table 1. For example, ‘educational’, ‘power’ and ‘highway and street’ each account for more than 7% of total construction, whereas ‘religious’, ‘public safety’ and ‘conservation and development’ all have shares that are under 1.0%.

Explanation of ‘speeding up’ or ‘slowing down’: If the three-month percent change exceeds the 12-month percent change, then construction activity in that type-of-structure is designated as speeding up. A check mark is entered in the far-right column of Table 1. (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, it’s a case 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.

Graph1

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

The most recent residential, nonresidential building and engineering data points in the graph are the sums of each type-of-structure’s monthly numbers for September 2017 through August 2018.

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

The chief benefit of a rolling-forward 12-month average is that it eliminates seasonal effects.

Graph 1 shows that the volumes of ConstructConnect’s residential and nonresidential building starts have been nearly equal since late 2012. Nonresidential building starts soared a little higher in mid-2016, but the throttle was soon eased back again.

The curves for residential and nonresidential building both peaked in the Fall of 2017. Residential has been gradually sloping downwards since then. Nonresidential building fell sharply in the back half of 2017, but it has been on an essentially level path since the beginning of this year.

As for the third major type-of-structure category set out in Chart 1, ‘engineering/civil’ construction, its performance has been quite positive. The slope of the curve for engineering/civil starts has mainly been rising for more than a year-and-a-half, dating back to the opening months of 2017.

Tags: Alex Carrick, ConstructConnect, Housing

Category: ConstructConnect

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