Data Digest: Construction spending rebounds slightly in March

Construction spending totaled $769 billion at a seasonally adjusted annual rate in March, an increase of 1.4% from the downwardly revised February total but 6.7% below the March 2010 level, the Census Bureau reported today. Private residential spending rose 2.6% for the month but was 8.1% below the year-earlier total. The gain was driven by a 6.9% jump in the volatile improvements category; new single-family spending fell 1.0% and 9.4% over the two periods, and new multifamily spending dropped 2.2% and 13%. Private nonresidential spending climbed 1.8% for the month but fell 10% year-over-year. Public construction inched up 0.1% in March but fell 2.3% from a year before. Of the Census Bureau’s 10 largest nonresidential categories, seven increased for the month but only three rose year-over-year. In descending order of current size, the largest nonresidential types (combining private and public spending) were: highways and streets, up 0.6% for the month and 4.9% over 12 months; power, 1.8% and 3.9%; educational, 0.9% and -9.2%; transportation facilities, 0.2% and -7.1%; and health care, 2.4% and -3.2%. Manufacturing construction rose 5.2% in March and 5.3% in February but was still 28% below the March 2010 mark. Nonfarm payroll employment increased from March 2010 to March 2011 in 260 of the nation’s 372 metropolitan areas, decreased in 101 and remained flat in 11, the Bureau of Labor Statistics (BLS) reported on Wednesday. An analysis released by AGC on Tuesday showed construction employment rose in 138 metro areas (including divisions of larger areas) out of the 337 for which data is available, fell in 153 and was level in 46. (BLS combines mining and logging with construction in most metros to avoid disclosing data about industries with few employers.) Dallas-Plano-Irving added more construction jobs (9,800 combined jobs, 10%) than any other metro area during the past year while Bay City, Michigan, added the highest percentage (25%, 200 combined jobs). Other areas adding a large number of jobs included Chicago-Joliet-Naperville (3,900 construction jobs, 4%); Warren-Troy-Farmington Hills, Mich. (2,800 combined jobs, 10%); and Northern Virginia (2,600 combined jobs, 4%). Large percentage gains also occurred in Flagstaff, Arizona (24%, 400 combined jobs); Elkhart-Goshen, Indiana (20%, 500 combined jobs); and Houma-Bayou Cane-Thibodaux, Louisiana (18%, 900 construction jobs). The largest job losses were in Atlanta-Sandy Springs-Marietta (-6,800 construction jobs, -7%) and New York City (-6,800 combined jobs, -6%), closely followed by Los Angeles-Long Beach-Glendale (-6,600 construction jobs, -6%). Lewiston, Idaho (-38%, -500 combined jobs) lost the highest percentage. Other areas experiencing large percentage declines included Steubenville-Weirton, Ohio-West Virginia (-26%, -500 combined jobs); Bend, Oregon (-16%, -500 combined jobs); and Lafayette, La. (-15%, -1,000 construction jobs). Private-industry compensation (wages, salaries and benefits) increased 0.5%, seasonally adjusted, in the first quarter of 2011 and 2.0% over four quarters, BLS reported on Friday. Construction compensation was unchanged for the second straight quarter and up only 0.6% over four quarters, the smallest increase of any industry. Construction wages and salaries were unchanged for the quarter and rose 0.5% over the year-earlier quarter. Real (net of inflation) gross domestic product (GDP) grew at 1.8% seasonally adjusted annual rate in the first quarter, down from a 3.1% rate in the fourth quarter of 2010, the Bureau of Economic Analysis (BEA) reported on Thursday. Real private investment in nonresidential structures plunged 22%, following a fourth-quarter gain of 7.6%. Real private residential investment fell 4.1%, following a 3.3% increase. Real government investment in structures fell 19%, following a decline of 7.9%; federal as well as state and local investment dropped sharply. The GDP price index increased 1.9% (up from 0.4% in the fourth quarter). The price indexes for structures rose 3.8% for private nonresidential structures (down from 4.0%), 1.3% for private residential investment (down from 2.7%), and 3.2% for government structures (up from 2.7%). Real GDP increased 1.9% in 2010, as 20 of 22 industry groups contributed to real GDP growth, BEA reported on Tuesday. Real value added for the construction industry fell 3.7%; nevertheless, that was the industry’s slowest rate of decline since 2006, BEA noted. Demand for warehouse construction is coming from some manufacturers who think the approach of keeping inventories to a minimum and relying on “just-in-time” deliveries “has gone too far, and that have a little extra padding might be a healthier option,” the Wall Street Journal reported on Friday. For instance, “Since January, lawn-mower manufacturer Ariens Co. has opened four new warehouses across North America to store finished mowers. [CEO Daniel] Ariens remains a fan of the just-in-time approach, but sees how the theory is stumbling in practice. For the past nine months, he says he has had trouble getting enough rubber belts and tires for his machines….Recently, however, his rubber supplier moved some production back from China to a factory in Tennessee, which Mr. Ariens hopes will make it easier for him to get faster shipments.” Totals for hotel projects and rooms under construction “have fallen to lows not seen since the 1990s,” consultancy Lodging Econometrics reported today. “Conversely, Early Planning counts have been growing since Q4 2009. Hotels that are larger and have longer timelines are being planned today for when construction financing becomes more accessible.”