The U.S. Census Bureau reported put-in-place construction statistics for March 2018. Construction spending was estimated at a seasonally adjusted annual rate of $1,284.7 billion, 1.7 percent (±0.8 percent) below the revised February estimate of $1,306.4 billion.
The March figure is 3.6 percent (±1.3 percent) above the March 2017 estimate of $1,239.6 billion.
During the first three months of this year, construction spending amounted to $279.0 billion, 5.5 percent (±1.2 percent) above the $264.5 billion for the same period in 2017.
In March, the estimated seasonally adjusted annual rate of public construction spending was $297.2 billion, nearly the same as (±1.6 percent) the revised February estimate of $297.3 billion. Highway construction was at a seasonally adjusted annual rate of $91.0 billion, 1.2 percent (±5.4 percent) above the revised February estimate of $89.9 billion
Spending on private construction was at a seasonally adjusted annual rate of $987.5 billion, 2.1 percent (±0.8 percent) below the revised February estimate of $1,009.1 billion.
Residential construction was at a seasonally adjusted annual rate of $536.8 billion in March, 3.5 percent (±1.3 percent) below the revised February estimate of $556.5 billion.
Nonresidential construction was at a seasonally adjusted annual rate of $450.7 billion in March, 0.4 percent (±0.8 percent) below the revised February estimate of $452.5 billion.
The monthly construction spending declines came as private-sector demand for health care, commercial, manufacturing and lodging construction all declined between February and March.
Those declines came as the Trump administration imposed new tariffs on steel and aluminum products – which are widely used in many forms of construction – on many countries and threatened to impose them on other trading partners, including Canada, Mexico and the European Union. The private sector funding declines were too large to offset the modest increase in public sector funding, particularly for highway and street construction, between February and March.
"The administration's new steel tariffs appear to already be having a negative impact on demand for many types of construction services," said Stephen E. Sandherr, chief executive officer of the Associated General Contractors of America. "Not only are contractors getting squeezed by higher prices for steel and aluminum products, but it seems many private sector developers are rethinking some investments amid growing fears of a trade war."
Associated Builders and Contractors Chief Economist Anirban Basu said that the nonresidential construction spending data emerging from the Census Bureau continue to be a bit at odds with other data characterizing growth in the level of activity.
"For instance, first quarter GDP data indicated brisk expansion in nonresidential investment," Basu said. “Data from ABC’s Construction Backlog Indicator, the Architecture Billings Index and other leading industry indicators have also been suggesting ongoing growth. Despite that, private nonresidential construction spending is up by roughly the inflation rate, indicating that the volume of services delivered over the past year has not expanded in real terms.
“That said, most economists who follow the industry presumed that Marchd ata would be somewhat soft,” said Basu. “The Northeast and Midwest were impacted by unusually persistent storm activity in March.The same phenomenon impacted March’s employment estimates, which indicated that construction actually lost 15,000 jobs that month. Other weather-sensitive industries, including retail trade, also experienced slow to negative job growth in March.
“The upshot is that CEOs and other construction leaders should remain upbeat regarding near-term prospects despite today’s construction spending report,” said Basu. “Leading indicators, including a host of confidence measures, collectively suggest that business investment will be on the rise during the months ahead. Improved state and local government finances should also support additional nonresidential construction activity.
“At the same time, construction industry leaders must remain wary of a sea of emerging risks to the ongoing economic and construction industry expansions,” said Basu. “Interest rates are on the rise. Materials prices, including those associated with softwood lumber, steel and aluminum, are expanding briskly. Wage pressures continue to build. There are also issues related to America’s expanding national debt, increasingly volatile financial markets, geopolitical uncertainty that has helped to propel fuel prices higher, and lack of transparency regarding America’s infrastructure investment intentions. The challenge for construction CEOs and others, therefore, is to prepare for growing activity in the near-term, but for something potentially rather different two to three years from now.”
Dodge Momentum Index Moves Higher
The Dodge Momentum Index jumped 6.1 percent in April to 163.0 (2000=100) from the revised March reading of 153.7. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year.
Both components of the Momentum Index moved higher in April, with the commercial component up 6.3 percent and the institutional component up 5.8 percent.
Over the last two months the commercial portion of the Momentum Index has posted the most aggressive growth, fueled by continued low vacancy rates for commercial buildings as well as the potential benefits from the tax cuts passed in December. The gains for the institutional component, while healthy, have been more moderate reflecting the ebb and flow of public funding for larger education and public building projects.
In April, 12 projects each with a value of $100 million or more entered planning. The two leading commercial projects were office buildings – a $200 million building in Boston and a $175 million building in Atlanta. The leading institutional projects were a $100 million hospital in San Luis Obispo, Calif., and a $100 million training center in Pelham, Ala.
New Home Sales Rise 4 Percent
Sales of newly built, single-family homes rose 4.0 percent in March to a seasonally adjusted annual rate of 694,000 units after an upwardly revised February report, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. This the second highest reading since the Great Recession.
“The March new home sales report is consistent with our solid builder confidence readings over the past several months,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “As consumer confidence grows and more prospective buyers enter the housing market, the sales numbers should continue to make gains.”
Regionally, new home sales rose 28.3 percent in the West and 0.8 percent in the South. Sales decreased 2.4 percent in the Midwest and 54.8 percent in the Northeast.
“We saw sales move forward in the West and the South regions, which is in line with recent evidence of faster growth in population, employment and single-family construction in these areas,” said NAHB Senior Economist Michael Neal. “But with nationwide economic growth and favorable demographics, we can expect continued strengthening of the housing market across the country.”
The inventory of new home sales for sale was 301,000 in March, which is a 5.2-month supply at the current sales pace. The median sales price of new houses sold was $337,200
Great Lakes Limestone Trade Down 23 Percent
The coldest April since 1997 put a chill on the Great Lakes limestone trade. Shipments totaled just 1,254,226 net tons, a decrease of 23 percent compared to a year ago, according to the Lake Carriers’ Association. Loadings trailed the month’s five-year average by even more – 33.3 percent.
Loadings at U.S. ports totaled 1.1 million tons, a decrease of 19 percent. Shipments from Canadian quarries totaled 177,000 tons, a decrease of nearly 41 percent.
Year-to-date the limestone trade stands at 1.5 million tons, a decrease of 12.8 percent. Shipments from U.S. ports total 1.3 million tons, a decrease of 7 percent. The year-to-date total for U.S. ports includes 17,664 tons loaded in February and 218,452 tons shipped in March.
No limestone moved from Canadian quarries during the first quarter, so the April total is also the year-to-date total for Canadian ports.
Since 1880, Lake Carriers’ Association has represented the U.S.-flag Great Lakes fleet, which today can annually move more than 90 million tons of cargos that are the foundation of American manufacturing, power generation and construction: iron ore, limestone, coal, cement, and other dry bulk materials such as grain and sand. In turn, these cargos generate and sustain more than 103,000 jobs in the eight Great Lakes states and have an annual economic impact of more than $20 billion.