The producer price index (PPI) for finished goods had a record single-month drop in October: 2.6%, not seasonally adjusted (-2.8%, seasonally adjusted), the Bureau of Labor Statistics (BLS) reported on Tuesday, although the index still rose 3.7% over 12 months. The PPI for inputs to construction industries, which is a weighted average of materials used in every type of construction plus items such as diesel fuel that are consumed by contractors, fell 2.8% for the month, not seasonally adjusted, but was up 10% from October 2007. Prices by material diverged dramatically. The PPI for diesel plunged 17.5% for the month but was still up 13% over 12 months; liquid asphalt, -18% and 89%; asphalt paving mixtures and blocks, -4% and 45%; concrete products, -0.2% and 4.1%; steel mill products, -4.2% and 34%; copper and brass mill shapes, -7.5% and -13.5%. Some items continued to rise, including construction machinery and equipment, 0.5% and 4.2%; plastic construction products, 0.3% and 7.3%, insulation materials, 1.1% and 0.3%; and gypsum products, 2.2% and 4.3%. These differences produced wide variation in PPIs for inputs by construction type: highway and street construction, -5.8% and 15%; other heavy construction, -4.1% and 12%; nonresidential buildings, -2.8% and 9.4%; new multi-unit residential, -2.1% and 7.5%; and new single-unit residential, -1.2% and 8.1%. There was also a spread among PPIs for finished buildings: new industrial buildings, 4.5% and 7.6%; offices, 4.1% and 5.8%; warehouses, 3.9% and 6.4%; and schools, -0.2% and 7.9%. The PPIs introduced in July for nonresidential building subcontractors all rose about 2% in October: concrete, 1.7%; roofing, 2.2%; electrical, 1.9%; and plumbing, 2.3%.
New construction starts slumped 9% in October, McGraw-Hill Construction reported on Friday, based on its own data collection. Nonresidential building fell 9%; residential building, 10%; and nonbuilding construction, 6%, with “improvement for public works, but also a sharp retreat for the often volatile electric utility segment….During the first 10 months of 2008, total construction [fell] 15% from a year ago. Excluding residential building, new construction starts… still held onto a slight 1% lead over last year.” Similarly, Reed Construction Data, using its own data set, reported on Wednesday that the value of construction starts other than single-family residential fell 2.5%, compared to the first 10 months of 2007. October starts were 14% lower than in September. Starts for private office, retail, warehouse and hotel projects plunged 38% from September to October. The “Architecture Billings Index (ABI) plummeted to its lowest level since the survey began in 1995,” the American Institute of Architects (AIA) reported on Wednesday. “The inquiries for new projects score was…also a historic low point. ‘Until recently, the institutional sector had been somewhat insulated from the deteriorating conditions affecting the commercial and residential markets,’ said AIA Chief Economist Kermit Baker. ‘Now we are seeing that governments and nonprofit agencies are having difficulties getting bonds approved to finance large scale education and healthcare facilities, furthering the weak conditions across the construction industry.'"
"In October alone, as much as $20 billion of new [bond-funded state and local] projects were postponed, says Thomas Doe, founder of investment advisory firm Municipal Market Advisors,” USA Today reported on Thursday. “Wake County, North Carolina…canceled a $454 million bond, part of which would have paid for school renovations.” The article also cited delayed or canceled school projects in Cleveland; Loudoun County, Virginia; Spring Hill, Tennessee; Osakis, Minnesota; and Big Spring School District in Pennsylvania. A sidebar reported on states that have postponed plans to fund highway projects with Garvee (grant-anticipation revenue vehicle) bonds: Idaho, $115 million; Maryland, $425 million; Arkansas; and Arizona. “Maryland could be forced to rein in transportation projects by an additional $2.5 billion in coming years, legislative analysts said yesterday, citing a sharp drop-off in tax collections on car sales and gas purchases that has also hamstrung Virginia and other states,” the Washington Post reported on Wednesday. Utah has postponed $3.9 billion of highway construction, the Salt Lake Tribune reported on Thursday. “The trouble is declining sales, with tax revenues off almost 9% for the fiscal year that began in July. Gas taxes also are off by 11%."
Even wind and solar power projects are being canceled. Clear Skies Solar Inc. of New York “recently canceled plans to build a one-megawatt solar plant in California’s Mojave Desert, unable to get financing even though a California utility agreed to buy all the output,” the Wall Street Journal reported on Thursday. “Hobbled by the financial crisis, power companies across the U.S. are slashing capital budgets and canceling projects for clean electricity….Duke Energy Corp. cut in half a planned $100 million investment in which it would lease space on the roofs of homes and businesses…to erect solar panels Duke will own to feed electricity directly into the grid….Duke also is pulling the plug on a $400 million wind-power project it planned to build with a partner. Public Service Enterprise Group Inc., New Jersey’s largest utility, said it is cutting next year’s capital-expenditure budget as much as 15%, with up to 40% of the cut coming from renewable energy….FPL Group Inc., one of the country’s biggest producers of wind power, said it is cutting capital spending for wind-energy projects by nearly $1 billion next year….And one of the nation’s biggest utilities, American Electric Power Co., plans to cut capital spending by 23% to about $2.6 billion next year, with more than half the cuts in environmental spending. It plans to delay installation of pollution-control scrubbers…in Arkansas, Texas and Oklahoma."
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