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AGC's Data DIGest: February 24-28, 2014

Starts tumble in January, MHC and Reed say; IIR sees double-digit industrial project rise

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The value of new construction starts (including residential) tumbled 13%, seasonally adjusted, in January 2014 from December 2013 and 5%, not seasonally adjusted, from January 2013, McGraw Hill Construction (MHC) reported on February 21, based on data it collected. There were “moderate declines reported for nonresidential building [-6% for the month and year-over-year] and housing [-2% for the month, +8% year-over-year], as well as a more substantial loss of momentum [–32% for the month, -19% year-over-year] for nonbuilding construction (public works and electric utilities) after a particularly robust December….‘The year 2014 began slowly, due to behavior specific to each of the three main construction sectors,’ stated [chief economist Robert Murray]. ‘Nonresidential building in 2013 advanced 7%, but the progress was occasionally hesitant, including sluggish activity at the end of last year that carried over into January. At the same time, the prospects for continued growth for nonresidential building during 2014 are generally positive, helped by receding vacancies for commercial properties and some improvement in the fiscal health of state governments. Residential building in 2013 climbed 24%, but towards the end of last year growth began to decelerate as mortgage lending to first-time homebuyers remained stringent. The January slowdown for housing was due in part to tough winter weather conditions, yet the deceleration in recent months bears watching going forward. Nonbuilding construction in 2013 dropped 12%, as the steep pullback by electric utilities outweighed surprising growth for public works. Last year’s nonbuilding performance was also quite volatile on a month-to-month basis, including strong activity in December that’s now been followed by a sharp reduction in January. With 2014 not likely to see the same volume of very large public works projects reach the construction start stage, nonbuilding construction is expected to register another decline this year...’”

The value of nonresidential construction starts skidded 6.4%, not seasonally adjusted, from January 2013 to January 2014, Reed Construction Data reported on Thursday, using data it collected. Nonresidential building construction starts slumped 12%, with declines in all three major subcategories (listed in descending current size): commercial, -17%; institutional, -4.0%; and industrial, -42%. Heavy engineering starts climbed 4.3%.

The benefits from expected continuing expansion of oil and gas production “are set to lift U.S. industrial project spending in 2014 by more than 10% from last year,” project-tracking firm Industrial Info Resources (IIR) reported on February 18. “For the past few years in the U.S., much of the spending that has occurred has been directly involved in the oil and gas extraction process: drill pipe fabrication, fracking equipment producers, steel pipe/tube mills, etc. Spending is now reaching into new sectors. Midstream natural gas processing and fractionation projects have escalated significantly, particularly in the Eagle Ford and Marcellus areas.”

“The winter weather has had a dampening effect on price increases for most products but caused prices to go up on others, such as lumber,” New South Construction Supply eNews reported on Wednesday. “R Max increased prices for their polyisocyanurate insulations in January and Dow Chemical Company increased prices on February 4th by approximately 5%. Other manufacturers are expected to increase prices in late February or early March by the same percentage…. Dimensional lumber and plywood prices increased by approximately 7% the first two weeks in February, primarily due to the severe weather in the U.S. this winter which caused many lumber mills to shut down for several days. The mill closings also caused shortages of some sizes and types of lumber and longer-than-usual lead times are expected to last through March. Prices are expected to go even higher over coming weeks…as demand normally increases in March and April….Although scrap steel prices softened in early February, domestic rebar mills have made no indication if they will reduce their prices for March shipments. Most industry analysts expect domestic mills to try and hold the line on prices in March; however, unless demand increases dramatically, domestic mills may be forced to reduce prices in March due to a large amount of less expensive imported rebar being available in some U.S. markets…. Grace Construction Products [said it] will increase prices by 5% on February 22nd on all commercial waterproofing and air barriers….Due to weak sales in January and early February, polyethylene sheeting manufacturers have yet to raise prices despite being hit with two resin price increases in January and February. Most manufacturers have indicated they will increase prices by mid-March by around 7% and if the February resin price increase holds, they will increase prices again sometime in April…. Some polyolefin under-slab vapor barrier manufacturers announced a 7% price increase for February. Since January, other manufacturers announced they will increase prices also. As with polyethylene, if the February resin price increase holds, expect polyolefin under-slab vapor barriers to increase prices again in March or April.”

The Data DIGest is a weekly summary of economic news; items most relevant to construction are in italics. All rights reserved. Sign up at www.agc.org/datadigest.

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