Construction spending slips but homebuilding rises; states vary on highway stimulus
September 1, 2009
Construction spending in July totaled $958 billion at a seasonally adjusted annual rate (SAAR), 0.2% less than the downwardly revised June total and 10.5% less than in July 2008, the Census Bureau reported today. (Seasonal adjustment is a statistical technique to remove normal weather- or holiday-related fluctuations. Annual rate allows comparison of quarterly or monthly changes to full years.) Private nonresidential spending fell for the fifth month in a row, slumping 1.2% in July, after tumbling 2.2% in June. Losses were most acute for developer-financed categories: lodging, -8.4% for the month and -35% compared to July 2008; office, -1.7% and -26%; and commercial (retail, wholesale and farm), -1.7% and -35%. The only private categories that outpaced the July 2008 level were manufacturing construction, up 0.9% for the month and 47% over 12 months; and power construction, down 0.8% in July but up 10% from a year earlier. Public spending slipped 0.8% from June to July, after five consecutive monthly increases, as cutbacks in state and local government budgets offset federal stimulus dollars. The only significant exception was in water supply projects, where spending increased 3.7%, following a 6.8% jump in June. Private residential construction rose 2.3% for the month as new single-family construction spending surged 7.0% in July, following a 3.1% gain in June. New multi-family construction plunged 3.3% for the month and 37% year-over-year. Residential improvements fell 0.2% in July but rose 6% year-to-year.
States have obligated 70% of highway stimulus funds for 6,929 projects as of August 31, according to a table the Federal Highway Administration distributed today. However, only 5% of funds had been expended. The table showed that $26.6 billion was made available to 50 states, the District of Columbia and five outlying areas. Among the states, Wyoming had obligated the most, 99%, followed by Maine and New Hampshire, 95% each. Every state had obligated at least 40% of available funds, with Virginia (40%), Nevada (42%), and Hawaii (43%) at the low end. Maine led in funds expended (40%), followed by Iowa and South Dakota (24% each). No money had been expended in Hawaii and less than 0.5% each in Florida, South Carolina, California, Virginia, Delaware and D.C. States varied widely in the average size of project, ranging from $900,000 in Indiana, North Dakota and Oregon to $14 million in New Mexico and $8 million in D.C.
Power and manufacturing construction should get a lift from several recent projects. In separate stories on Monday, the Wall Street Journal reported that investment funds are flowing to wind energy through provisions in the stimulus act that took effect at the end of July and that "Duke Energy Corp. plans to build its ninth wind farm in the U.S., and fourth in Wyoming," involving at least 66 turbines. The Southtown Star (Illinois) reported on Monday, "Enbridge, a pipeline company that transports Canadian crude oil to the United States [is building] the $2.7 billion Southern Lights pipeline, which is to stretch 1,600 miles from Will County [Illinois] to Edmonton, Alberta." Rolls-Royce plc announced on Friday that it will spend more than $100 million on a manufacturing plant in Crosspointe, Va. "Over time, the company anticipates additional investment of up to $500 million in Virginia."
Unemployment rates were higher in July than a year earlier in all 372 metropolitan areas, the Bureau of Labor Statistics (BLS) reported today. The national unemployment rate in July was 9.7%, not seasonally adjusted, up from 6.0% a year earlier. Among the 369 metropolitan areas for which nonfarm payroll data were available, 353 areas reported over-the-year decreases in nonfarm payroll employment, 14 reported increases, and 2 had no change. An analysis AGC released Monday of BLS data on metro employment in construction (combined with logging and mining in metros for which these industries have small totals) showed that of 336 metro areas for which data was available, construction employment fell in 319, rose in 11 and was unchanged in six. The worst hit, Reno-Sparks, Nevada, had a 33% decrease, followed by Wenatchee, Washington; Duluth, Minnesota-Wisconsin; and Tucson, 32% each. Columbus, Indiana, again led the nation in construction job growth with a 14% increase, followed by Weirton-Steubenville, West Virginia-Ohio, 13%; Anderson, Ind. and Baton Rouge, 6% each; and Longview, Wash., 3%.
Real (net of inflation) investment in private nonresidential structures shrank 15% (SAAR) in the second quarter, following an even steeper 44% contraction in the first quarter, according to revised estimates released by the Bureau of Economic Analysis on Thursday. Real residential investment plunged 23%, following a 38% drop. In contrast, real government investment in structures soared 21%, after a 4.3% first-quarter decline. Price indexes shriveled 9.7% (SAAR) for private nonresidential structures, 5.4% for residential investment and 4.3% for government structures.
The Federal Reserve on July 17 reported the results of a quarterly survey of senior loan officers at 55 large domestic banks and 23 branches of foreign banks. "The fraction of domestic respondents that reported tightening standards on CRE [commercial real estate] loans fell to about 45%, compared with 65% in April. Still, this fraction is higher than that reported for [commercial and industrial] loans and all consumer lending categories except nontraditional residential mortgages. About 45% of foreign banks also reported tightening standards on CRE loans, a slight increase from the figure reported in April. The net percentage of domestic respondents that reported weaker demand for CRE loans fell slightly-to roughly 65%–but it remained large by historical standards and relative to other loan categories. About 45% of foreign respondents also reported weaker demand, a slight increase from the April survey."