Economy
Non-Residential Construction Rebound Imminent
Written by Sandy Williams
February 11, 2014
A recovery in non-residential construction is happening said research analyst Timna Tanners, in a report by Bank of America Merrill Lynch, but the upturn for the non-residential cycle has taken longer than expected and is “less pronounced” than usual.
The last strong cycle for non-residential construction was in 2005-2007, supporting a booming housing market. The current cycle, says Tanners, is confronted by less public spending on infrastructure and tight credit conditions.
Leading indicators like the Federal Reserve Loan Officer Survey and the Architectural Billings Index have been misleading according to Tanners, with the ABI showing a false positive since the second half of 2012. Anecdotal evidence has given the strongest credence to an upswing in non-res construction. Backlogs at steel mills and stronger order books at fabricators and cement businesses indicate a slow but steady recovery in 2014 with potential acceleration in 2015.
Normally non-residential recovery lags behind residential by one to two years. Residential construction has been strong since 2012 but has yet to give the traditional boost to non-residential. Tanners found historical evidence of lags of 30+ months for the non-res cycle which, if applicable in the current cycle, would push serious recovery into the second half of 2014.
Other encouraging indicators are an increase in capacity utilization rates to 79.2 percent in December and a rise of 3.6 percent year-over-year for industrial production. Highway construction also picked up with awards data showing a 6 percent increase from the 2005-2012 average and 7 percent increase year-over-year. Federal Reserve reports also indicated commercial construction beginning to increase, along with commercial sales and leasing activity. The energy sector continues to show increased activity.
Sandy Williams
Read more from Sandy WilliamsLatest in Economy
Steel Summit: ITR economist urges execs to prepare for growth, not recession
If the steel industry professionals who made it to the very final presentation of this year’s SMU Steel Summit were expecting another round of cautious forecasting, they were in for a surprise. Because what they got was a wake-up call.
ISM: Manufacturing growth remained down in August
US manufacturing activity remained muted in August despite a marginal gain from July's recent low, according to supply executives contributing to the Institute for Supply Management (ISM)’s latest report.
Steel Summit: Dr. Basu blames tariffs for riskier path ahead
Steel executives packed the main conference hall of the 2025 SMU Steel Summit on Tuesday, Aug. 26, to hear economist Dr. Anirban Basu lay out his blunt view of tariffs, inflation, and demand.
Steel Summit: Schneider sees SDI ‘on the edge of a very good run’
Steel Dynamics Inc. (SDI) President and Chief Operating Officer, Barry Schneider, remains bullish about the Fort Wayne, Ind.-based steelmaker’s position in the current market.
US housing starts gain momentum in July
US housing starts rose in July both month-on-month and year-on-year, according to figures from the US Census Bureau.