"The level of construction starts in 2010 is expected to climb 11%," McGraw-Hill Construction (MHC) forecasted on Frday, "following the 25% decline predicted for 2009. 'The U.S. construction market in 2010 will be helped by growth for several sectors, following three straight years of decline that brought total construction activity down 39% from its mid-decade peak,' said Robert Murray, vice president of economic affairs...'The benefits from the stimulus act will broaden in scope, lifting not just highway construction but also environmental public works and several institutional structure types. With continued improvement expected for single family housing, after reaching bottom earlier this year, the overall level of construction activity should see moderate expansion in 2010.'" MHC predicted, "Single-family housing for 2010 will advance 32% in dollars, corresponding to a 30% increase in the number of units to 560,000 (McGraw-Hill Construction basis). Multifamily housing will improve 16% in dollars and 14% in units, after steep reductions in 2008 and 2009. Commercial buildings will drop 4% in dollars, following a steep 43% drop in 2009. The weak employment picture will further depress occupancies, making it even more difficult to justify new construction. Institutional buildings will begin to stabilize after losing momentum in 2009. Square footage will retreat another 2% after sliding 23% this year. The dollar amount of construction for this sector will edge up 1%, helped by a growing amount of energy-efficiency upgrades to federal buildings and continued strength for military buildings. Manufacturing buildings will drop 14% in dollars and 3% in square feet, hampered by the substantial amount of slack manufacturing capacity. Public works construction is expected to rise 14%, given more wide-ranging strength across all project types. Electric utility construction will slip 3%, continuing to settle back after a record high in 2008."
The value of nonresidential construction starts in September fell 20% from August before seasonal adjustment and "about 7% after seasonal adjustment," Reed Construction Data (RCD) reported on Wednesday, based on its own data collection. "Nonetheless, the starts trend has recently improved after the plunge in June. Starts averaged 5% higher in July-September than in the same period last year....This is the net of rising starts for heavy projects and declining starts for nonresidential building projects, especially developer-financed projects. The current trend is consistent with the RCD forecast which expects construction spending to drop slightly more into the winter and then recover slowly. The RCD starts forecast expects little change well into next year with a turn to expansion later in 2010....The only significant gains in September from August were for nursing homes (112%), hospitals (42%) and retail (26%)....These September jumps do not change the expected near-term trend in these markets. The three key targeted markets under the Stimulus Plan all declined sharply in September [bridge, -63%; highway, -30%; and water/sewer, -23%]. But these dips are the usual seasonal decline at the end of the summer and do not suggest that stimulus spending for heavy projects has peaked, although a peak is expected later this year. Both manufacturing and miscellaneous civil starts remained very high again in September due to energy-related projects including power generation and distribution, oil and gas field facilities and refinery retrofitting to produce cleaner fuels. Manufacturing starts tripled from August to the largest total in more than two years."
Industrial production (IP) at factories rose 0.9% in September, seasonally adjusted, the third straight monthly gain, but was 7.7% below the year-ago level, the Federal Reserve reported on Friday. IP of construction supplies fell 0.4% and 16.7%. Manufacturing capacity utilization rose for the third month in a row, to 67.5% of capacity, still far below the 1972-2008 average of 79.6%. High utilization and IP are both necessary to generate demand for factory construction. Surveys released on Thursday by the New York and Philadelphia Federal Reserve Banks also showed manufacturing gains.
The consumer price index (CPI) for all urban consumers rose 0.2% in September, seasonally adjusted, but fell 1.3% over the past 12 months, the Bureau of Labor Statistics reported on Friday. The CPI for urban wage earners and clerical workers (CPI-W), used to adjust many construction and other wage contracts, fell 1.7% over 12 months.
The first required reports on jobs attributable to stimulus funds were posted on www.recovery.gov on Thursday, "with much more data to come on October 30," www.CNNMoney.com reported on Friday. "The contract awards posted Thursday represented less than 7% of the total stimulus funds doled out so far. By far the largest part of stimulus is in grants to states, which account for 83% of stimulus funding. Loans to recipients make up the other 10%. Both grants and loans will be posted on recovery.gov at the end of the month. There were 5,232 federal contracts reported Thursday, but 41,944 grants and loans will be reported on October 30....A mistake in the very first contract listed on the site prompted doubts about the reliability of the reports....Even the job figures that are input correctly do not always reflect the true number of positions created by stimulus funds. For instance, UT-Battelle received a $338.7 million contract, listed as the fourth largest on the recovery.gov site. So far, the company, which manages Oak Ridge National Laboratory in Tennessee for the Department of Energy, has spent $13 million and created 41 jobs, mostly related to the oversight of subcontractors. But the funding is actually creating many more jobs, said Thom Mason, UT-Battelle's CEO. Among the firm's first stimulus projects is the building of a chemistry and new materials research lab, which will employ 150 construction workers. None of these positions will appear on UT-Battelle's reports to the federal government."
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