March construction spending rose; bank lending still tight, Fed finds; some prices dip

Construction spending increased 0.3% in March to a seasonally adjusted annual rate of $970 billion, the Census Bureau reported on Monday. The total was down 11% from March 2008. Private residential construction fell 4.1% for the month and 33% from a year earlier, private nonresidential rose 2.7% and 1.2%, and public construction rose 1.1% and 2.6%. The totals probably do not include any spending of federal stimulus funds, which is not likely to show up as construction put in place before May given the steps required, even after an agency announces a project. Although seasonal adjustment removes normal weather-related variation, combined January-March data probably provides a more reliable picture of the trend, especially for smaller components. Among the larger nonresidential segments, educational construction rose 5% in the first quarter relative to the first three months of 2008; manufacturing, 65%; power, 11%; and healthcare, 3%. The Census figures do not break out the subcategory that produced the huge manufacturing gain but other reports suggest it was driven by several huge refinery upgrades and a steel mill. There were decreases for commercial (retail, warehouse and farm), -22%; office, -8%; highway and street, -3%; and lodging, -6%. Among residential segments, new single-family fell 49%; new multi-family, -14%; and improvements, -8.4%. "About 65% of domestic banks, on net, reported tightening their lending standards on commercial real estate (CRE) loans over the previous three months, compared with about 80% in the January survey" of senior loan officers at 53 domestic banks and 23 subsidiaries of foreign bank holding companies, the Federal Reserve reported on Monday. "On balance, domestic banks have been tightening credit standards on CRE loans for 14 consecutive surveys, and the April survey marks the first time since October 2007 that the net proportion of banks reporting such tightening fell below 70%. About 35% of foreign branches and agencies also reported tightening their lending standards on CRE loans over the survey period. The demand for CRE loans weakened further at survey respondents over the previous three months. About 65% of domestic banks, on balance, reported weaker demand for CRE loans, the highest net percentage so reporting since the survey began tracking demand for CRE loans in April 1995. In contrast, the net proportion of foreign banks that reported a decrease in demand for CRE loans--about 35%--was somewhat smaller than that in the January survey....In the April survey, somewhat larger fractions of domestic respondents than in the January survey reported having tightened their lending standards on prime and nontraditional residential mortgages....About 35% of domestic respondents saw stronger demand, on net, for prime residential mortgage loans over the previous three months, a substantial change from the roughly 10% [on net] that reported weaker demand in the January survey." Consistent with the Fed survey's report on rising demand for residential mortgages, the National Association of Realtors reported on Monday that its monthly Pending Home Sales Index, based on contracts signed in March, increased 3.2% from February and 1.1% from March 2008. The index rose in the West and South and fell in the Midwest and Northeast. It is higher than a year ago in all regions except the Northeast. "In April, three industries reported an increase in prices paid in the following order: Health Care & Social Assistance; Arts, Entertainment & Recreation; and Construction," whereas 10 industries reported lower prices paid,  the Institute for Supply Management (ISM) reported today in its monthly survey of purchasing executives in 15 nonmanufacturing sectors. Among the few reports of price changes of significance were decreases for carbon pipe, fuel surcharges and stainless steel. In addition, respondents to the ISM manufacturing survey released on Friday listed copper as up in price and aluminum, steel and steel products as down in price. Construction was one of seven industries in the nonmanufacturing survey that reported reduced business activity in April, vs. nine with growth. Prices for diesel fuel and liquid asphalt fell. The Energy Information Administration reported on Monday that the national average price for on-highway diesel dropped  two cents to $2.19 per gallon, down 47% from a year ago and 54% from its peak last July. The Illinois Department of Transportation (DOT) reported on Tuesday that its monthly bituminous index dropped $25 per ton on May 1 to $417, 1.5% higher than a year earlier but 42% lower than on September 1. But the New Mexico DOT kept its asphalt rack-price index for June at $543, unchanged from May and April, but down 36% from a record $851 last September. The differing patterns show how localized asphalt prices are. The Bureau of Labor Statistics on Friday released employment and wage estimates for wage and salary workers in 20 industries, including construction, 22 major occupational groups and 801 detailed occupations, including more than 40 construction occupations (www.bls.gov/oes). Among the data in the release that illustrate what can be pulled from the data base for each industry, occupation, state and metro area: There were 7.5 million employees in construction firms, of whom 4.9 million worked in construction and extraction occupations,. An additional 1.6 million workers in these occupations worked in other industries. The median wage for sales and related occupations in construction firms ($23.93 per hour) was double the all-industry median. The highest concentration of construction and maintenance painters was in the Naples-Marco Island, Florida, metro area (8.1 per 1,000 area jobs) and statewide in Nevada, Hawaii, Washington and Louisiana (3.1).