The value of construction starts in January through April 2010 was 11% higher than in the same months of 2009, Reed Construction Data reported on Tuesday, based on data it compiled. April starts were 6.6% higher than March starts. "a little short of the usual seasonal gain in April. So April has to be interpreted as approximately steady with March," said Reed Chief Economist Jim Haughey. "April starts were 25% higher than a year ago but there is no clear signal yet that the economic recovery has reached the construction market....The economic environment for construction is clearly improving. Contractors added 40,000 jobs in the last two months. Buildings funded by the stimulus plan are beginning to be started. And the rise in the commercial vacancy rate is now slowing. The post-stimulus slide in heavy project starts continued in April. Starts fell 3.4% from March and were off 40% from the stimulus-boosted peak last August. The stimulus impact in the heavy market continues to ebb month to month. But no further significant decline is expected as delayed transportation and water-sewer projects replace slipping highway project starts. April nonresidential building starts were 13% above March, about double the usual seasonal gain, and 31% higher than a year ago [but] 19% below the 2006 to 2008 average....the April starts gain was due to a big rebound in hospital starts after four weak months, plus smaller pickups in education and commercial buildings."
Industrial production (IP) in manufacturing climbed 1.0% in April seasonally adjusted, and was 6.0% higher than in April 2009, the Federal Reserve reported today. IP of construction supplies rose 2.8% for the month and 2.9% from a year ago. "Capacity utilization for manufacturing moved up 0.8 percentage point to 70.8%, a rate 8.4 percentage points below its average from 1972 to 2009, but 5.7 percentage points above its trough in June 2009," the Fed said. Sustained output growth and relatively high capacity utilization are both needed to trigger broad demand for factory construction.
"A four-year slump in construction may be nearing an end, with the biggest U.S. building-material makers reporting higher monthly sales that have yet to spread industrywide," Bloomberg.com reported on Monday. "Cemex SAB, the largest U.S. cement producer, and Vulcan Materials Co., the top gravel supplier, just reported monthly volume increases for March and April, their first since 2006. The results exceeded estimates and may lead the Portland Cement Association, a trade organization that represents U.S. and Canadian companies, to increase its growth forecast this year, said Ed Sullivan, its chief economist. ‘This upturn, even though it's still based on limited data, is to be believed,' Sullivan said in an interview. ‘From what I'm hearing, it's a significant uptick in April and I think we're going to see a very good May as well.' Increases in housing starts and rail shipments of crushed rock, sand and gravel indicate a rebound in construction....Demand for gypsum wallboard and home insulation, which can trail housing starts by six months, continues to decline. Chicago-based USG Corp., the largest U.S. producer of wallboard, said on April 20 that first-quarter shipments fell 12% from the year earlier. Owens Corning Inc., the nation's biggest maker of insulation, expects to keep losing money in that business this year because of weak demand, [CEO] Mike Thaman told analysts on April 28."
The homebuilding market is mixed. Builders interviewed for a report issued today by EconoPlay (www.econoplay.com) cited big gains for one builder in Houston, with Phoenix and Minneapolis "starting to come back" but not Atlanta. Another saw improvement in Des Moines but not Cedar Rapids, Iowa. A Minnesota builder said, "‘Our sales were down 12% in April 2010 vs. 2009' and May traffic and sales remain poor....‘We had good sales in April,' said Norman Dreyfuss, executive vice president of the IDI Group of Companies in Maryland and Virginia, a multifamily builder....George Pattee, CEO of Parksite Group, a supplier of building materials [said] his strongest sales are in New England, a mature market not tied to new construction. Florida and North Carolina, which are tied to new construction, ‘are still horrible,' he said....‘In March, I had my biggest sales increase in three years. In April my sales moderated. And May has been stinky,' said Barry Russin, president of Russin Lumber in Montgomery, New York, a supplier to lumber yards throughout the Northeast.... Lumber prices picked up strongly all year, ‘but they finally broke to the downside two weeks ago'-a sign that demand for construction materials is abating, Russin said."
Other construction input prices have also turned down recently. Today, crude-oil futures for June delivery closed at $71.61 per barrel on the New York Mercantile Exchange, a three-month low and down about $15 (17%) from the high last month. Comex copper futures closed at $3.12 per pound, down about 55 cents (15%) from their peak. The cash price for aluminum has also fallen more than 10% from its peak, but stainless steel scrap is up 133% from a year ago.
"Build America Bond sales exceeded $100 billion this week, 13 months after the first issuance of the taxable securities, Bloomberg.com reported on Tuesday. "The securities were created as part of last year's federal economic stimulus package to help state and local governments lower borrowing costs for public works. The program provides issuers with a 35% federal subsidy on interest costs." There is little evidence that the bonds have led to an increase in construction so far, but, by reducing borrowing costs, states have at least been able to avoid some budget cuts that would have occurred. Authority to issue the bonds is due to expire at yearend but the House and Senate are expected to consider bills this month to expand eligibility and extend them, probably with a smaller subsidy.
- Industry Priorities
- Education
- News
- Connect
- Benefits
- Events
- Shop