Construction spending fell in January to $884 billion at a seasonally adjusted annual rate, down 0.6% from December, down 9.3% from January 2009 and the lowest rate since June 2003, the Census Bureau reported today. November and December totals were revised down by 1.4% each, and the 2009 total, $937 billion, was 13% below the 2008 level. Private nonresidential spending shriveled 2.1% for the month and 20% compared to January 2009. Of 11 segments, only power construction rose (0.7% and 16%, respectively). The next largest segment, manufacturing, fell 4.8% and 29%. Commercial (retail, warehouse and farm) construction tumbled 0.5% and 34%; health care, -0.5% and -11%; office, -1.6% and -34%; communication, -6.0% and -9.9%; and lodging, -9.8% and -46%. Public construction continued to post a year-over-year gain, 2.1%, but dropped 0.7% for the month. The largest public segments had mixed results: highway and street, 1.2% and 5.5%; educational, 0.0% and -6.2%; transportation (transit, rail, airports, ports), -0.3% and 18%; and sewage and waste disposal, -3.0% and 1.8%. Private residential investment climbed 1.3% for the month and narrowed the year-to-year decline to 6.4%. The gains came entirely from the volatile "improvements" segment (4.7% and 11%); new single-family construction dipped after seven straight gains (-0.2% and -8.6%); and new multifamily plunged for the 10th month in a row (-11% and -52%).
The U.S. Department of Transportation (DOT) said in a press release today that it "will furlough nearly 2,000 employees without pay Monday, temporarily shutting down highway reimbursements to states worth hundreds of millions of dollars, national anti-drunk driving efforts, and multi-million dollar construction projects across the country. The action comes as a result of Kentucky Sen. Jim Bunning's decision to block key legislation that would have extended several critical priorities for middle-class families. That legislation covered tax credits for COBRA health coverage, unemployment insurance for 400,000 people, as well as the short-term extension of the Highway Trust Fund. The Fund supports all surface transportation programs for the nation-highways, bridges, transit and safety inspections, as well as efforts to encourage seat belt use and to fight distracted and impaired driving....Because of the shutdown, federal inspectors will be removed from critical construction projects, forcing work to come to a halt on federal lands." Reimbursements average $150-200 million per day, so the impact on states and their contractors will be substantial if Congress does not renew the authorization in a few days. "With continued uncertainty about federal funding levels for highway and bridge projects, the Missouri Department of Transportation is withdrawing all projects advertised for bid in tomorrow's February bid opening," the agency announced in a press release on Thursday.
"Billings at U.S. architecture firms fell again in January, beginning the third year of continuous decline in revenue at these firms," the American Institute of Architects reported today. The Architecture Billings Index (ABI), the difference between the number of firms with rising vs. falling billings compared to a month earlier (50 indicates an equal number), fell almost three points to a level of 42.5 in January, down from a revised 45.4 reading for December and 44.1 in November. No region of the country seems poised for an upturn....Residential architecture firms have reported some encouraging trends recently, eking out ABI scores just above 50 for two of the past three months, while commercial/ industrial and institutional firms are still facing weak market conditions." Credit availability is "still a problem for construction: Tighter restrictions in the credit markets, as well as weak demand for new facilities, have limited the availability of funding for many nonresidential construction projects. At present, over 90% of panelists rate construction project financing as at least a somewhat serious problem at present, while almost half (44%) rate it as an extremely serious problem. Respondents indicate that the extent of construction problems varies considerably from project to project; the most frequently mentioned categories where construction financing is an issue were commercial projects (71%), new construction projects (68%), and large projects (54%)."
"Despite near-zero interest rates and a continuing flood of credit into the U.S. economy from the Federal Reserve, financial conditions tightened in the second half of 2009, according to a new study produced by a collection of Wall Street and academic researchers," the Wall Street Journal reported on Saturday. "While interest rates remain near historic lows, the availability of credit is still constrained....Asset-backed securities markets-where commercial real-estate loans, car loans and many other kinds of bank loans were financed during the credit boom-are part of the picture. Loans in this market are packaged into securities and sold to investors. In 2006, issuance of asset-backed securities, not including residential mortgage-backed securities, topped $700 billion, according to the Securities Industry and Financial Markets Association. It was $168 billion last year."
"Dozens of cities and counties around the country, from Sarasota, Florida, to Boulder, Colorado, lost a total of $1.7 billion" when Lehman Brothers went bankrupt in September 2008, the Journal reported on Wednesday, "because they held Lehman bonds or other securities. The two worst-hit states are Florida and California," particularly San Mateo County, Cal. Public schools there have "delayed or canceled renovations. Local community colleges are slashing classes and scrapping new facilities [and the county] shelved plans to build a new women's jail."
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