Some McGraw-Hill starts rise in March; economic slide slows, say NABE, Beige Book
April 20, 2009
"New construction starts increased 5% in March," seasonally adjusted, McGraw-Hill Construction reported today, based on its own data compilation. However, for the first quarter of 2009 compared to the same months of 2008, total starts tumbled 40%. "The improved level of contracting relative to February was due to a strong increase for public works construction, helped by two large pipeline projects and a large rail project. At the same time, nonresidential building showed a further loss of momentum, and residential building slipped back after its brief upturn in February. Residential building starts fell 8% in March and 52% for the first quarter of 2009 compared to the same months of 2008; nonresidential building, -3% and -47%; and nonbuilding construction rose 27% for the month but fell 11% for the quarter.
The National Association of Business Economics (NABE) reported this morning, "'NABE's April 2009 Industry Survey [of 109 corporate and trade association economists] provides fresh evidence that the U.S. economy's recession is abating,' said Sara Johnson of IHS Global Insight. 'Key indicators-industry demand, employment, capital spending and profitability-are still declining, but the breadth of decline is moderating.'…The [net index] for capital spending expectations on structures over the next 12 months remained negative for the third consecutive quarter, but showed a slight improvement from January's reading. In the April survey, 11% of firms planned increases in spending on structures, up from 5% in January." Nevertheless, 31% of respondents said their firms plan to decrease investment in structures.
"Reports from the Federal Reserve Banks indicate that overall economic activity contracted further or remained weak" in the six weeks through April 6 since a previous set of soundings was conducted by the 12 regional banks. The results appeared Wednesday in the "Beige Book," named for its cover's color, in which districts are identified by their headquarters cities. "However, five of the 12 districts noted a moderation in the pace of decline, and several saw signs that activity in some sectors was stabilizing at a low level….Orders and shipments of capital goods, autos, paper, and construction-related equipment and products such as metals, wood products, lumber and electrical machinery remained mostly sluggish and below year-ago levels…Contacts in several districts said shipments of construction-related manufacturing products continued to drop at a substantial pace….New home construction activity fell further…as inventories remained elevated. Nonetheless, several districts, including Atlanta and Kansas City, said that inventories of unsold homes had turned down slightly….Nonresidential real-estate conditions continued to deteriorate over the past six weeks. Demand for office, industrial and retail space continued to fall, and there were reports of increases in sublease space….Construction activity continues to slow, and several districts noted increased postponement of both private and public projects. Nonresidential construction is expected to decline through year-end, although there were some hopeful reports that the stimulus package may lead to some improvement. Commercial real-estate investment activity weakened further. Contacts said a decline in credit availability and markdowns on commercial property were keeping buyers and sellers on the sidelines….Commercial real-estate lending continued to decline…. several reports noted more stringent requirements for commercial real-estate loans due to worries of worsening loan quality in the sector."
Industrial production [IP] in manufacturing "moved down 1.7% in March and has registered five consecutive quarterly decreases," the Fed reported on Wednesday. IP in manufacturing was 15% lower than a year earlier. IP of construction supplies shrank 2.8% in March and 21% over 12 months. Capacity utilization in manufacturing, which along with IP can indicate the future demand for plant construction, sank to 66%, compared to a long-run average of 80%.
Housing starts fell 11%, seasonally adjusted, in March, the Census Bureau reported on Thursday. But the decline was due entirely to a 29% fall in multifamily starts, which reversed a jump in February. Single-family starts were unchanged. Building permits fell 9%, with single-family down 7.4% and multifamily off 13%.
The producer price index (PPI) for finished goods fell 0.7%, not seasonally adjusted (-1.2%, seasonally adjusted), in March and 3.5% over the past 12 months, the Bureau of Labor Statistics (BLS) reported on Tuesday. The PPI for inputs to construction industries fell 0.6% for the month and 1.9% over 12 months. The steepest declines were for highway and street construction inputs, -0.9% and -7.0%, followed by other heavy construction, -0.8% and -5.8%; nonresidential buildings, -0.6% and -2.6%; multi-unit residential, -0.6% and -0.8%; and single-unit, -0.4% and 1.9%. Major contributors to the downturns were the PPI for diesel fuel, -8.9% and -62.5%; copper and brass mill shapes, 0.8% and -37%; aluminum mill shapes, -2.9% and -22%; steel mill products, -0.1% and -15%; and lumber and plywood, -2.5% and -9.6%. Mixed results were shown for asphalt paving mixtures and blocks, -1.9% and 17%; concrete products, -0.9% and 3.6%; and gypsum products, 0 and 9.0%. The PPI for construction machinery and equipment rose 0.4% and 5.1%.
The consumer price index (CPI) for all urban consumers fell 0.1%, seasonally adjusted, in March and 0.4% over 12 months, the first 12-month decline since 1955, BLS reported on Wednesday. The CPI for urban wage earners and clerical workers, which is used to adjust many wage contracts in construction and other sectors, fell 0.9% over 12 months.