McGraw-Hill Construction Differs From Reed Construction Data on Construction Starts For November
Data Digest reported that "As frequently happens, McGraw-Hill Construction (MHC) and Reed Construction Data reported sharply different results for the value of construction starts in November, based on data they each collect. Total construction starts fell 9%, seasonally adjusted, from October, MHC said. “Nonresidential building weakened for the second month in a row, while nonbuilding construction (public works and electric utilities) retreated after its elevated pace in October.
Meanwhile, residential building in November showed modest growth. For the first eleven months of 2010, total construction on an unadjusted basis was…down 4% from the corresponding period of 2009….‘Since early 2009, the construction start statistics have shown an up-and-down pattern, essentially leveling off within a set range following an extended three-year decline,’ stated Robert Murray, vice president of economic affairs….‘
The pullback in November after October’s slight gain shows that this up-and-down pattern continues, and there’s yet to be evidence that renewed expansion is taking hold. For nonresidential building, the worst of the decline for the commercial structure types has run its course, but the volume of activity remains very weak. The housing sector, after losing momentum during the spring, appears to be edging upward once again, but to this point the pickup has been meager.
For the public works sector, this year’s growth for transportation-related work has been offset by weaker activity for the environmental project types. In the near term, the overall economy may be helped by the recent extension of the federal tax cuts, but going into 2011 the construction industry will still face several constraints. These include: restrictive bank lending standards which have yet to ease, fading stimulus support, and further erosion in the fiscal health of states and localities.’”
The value of nonresidential construction starts soared 35% from October’s level and 13% above the November 2009 total, Reed reported on Thursday. Because the Reed data are not seasonally adjusted and “November is a seasonally weak month for construction starts,…the November starts surge is much stronger than the nominal 35% gain,” Chief Economist Jim Haughey explained.
“But the gains were unevenly distributed: more than $1 billion each for “hospitals, manufacturing (Nissan battery factory), military, bridges and miscellaneous civil projects. The only significant declines were for retail and highways.” Haughey predicted, “Starts trends are expected to change in 2011.
The pipeline of funding appropriated for heavy and institutional projects before the recession or included in stimulus programs is being used up and the pace of new funding is ebbing. By contrast, lending approval for commercial projects will improve significantly. This has already begun for apartments.”