Rock Products

JUL 2018

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54 • ROCK products • July 2018 The value of new construction starts in April fell 13 percent from the pre- vious month to a seasonally adjusted annual rate of $674.3 billion, according to Dodge Data & Analytics. The decline follows the 11 percent gain reported for March, which was the highest level of construction starts over the preceding six months. The loss of momentum in April was widespread, involving each of the three main construction sectors. Nonbuilding construction (public works and electric utilities/gas plants) plunged 22 percent after its 74 percent hike in March that featured the start of the $3.5 billion Mountain Valley Pipeline expansion in West Virginia and Virginia, as well as several large highway projects. Highway and bridge construction in April was down 12 percent. Nonresidential building retreated 12 percent due to a slower pace by its institutional and manufacturing seg- ments. Residential building dropped 9 percent with reduced activity for both single family and multifamily housing. "The construction start statistics can be volatile on a monthly basis, and given the wide swings present in March and April it's probably best to take the average of the two months in assessing the current health of the construction industry," stated Robert A. Murray, chief economist for Dodge Data & Analyt- ics. "The average for March and April shows that construction starts so far in 2018 are proceeding slightly behind last year's average pace. Even with this modest slowdown in early 2018, there are several factors in the current envi- ronment that should help construction activity to stay close to recent levels. Job growth continues to be strong, with the unemployment rate at the lowest level since 2000, which should limit any upward movement by commer- cial vacancy rates this year. In its latest quarterly survey of bank lending stan- dards, the Federal Reserve indicated that lending standards for nonresiden- tial building projects eased slightly on net during the first quarter of 2018, following the tightening that took place from late 2015 through 2017. In March, Congress reached agreement on fiscal 2018 appropriations, providing addi- tional funding for several public works programs. And, while interest rates are rising, the upward movement so far has been measured, with the ten-year Trea- sury bill stabilizing at about 3 percent from March through mid-May." Nonbuilding Construction Nonbuilding construction in April was $159.0 billion (annual rate), down 22 percent from March. The public works categories as a group dropped 25 per- cent after soaring 63 percent in March. The miscellaneous public works cat- egory plummeted 45 percent in April after being lifted in March by the $3.5 billion Mountain Valley Pipeline expan- sion in West Virginia and Virginia. There were two large rail-related proj- ects entered as April starts: the $1.2 billion rail portion of an expansion project for the Long Island Rail Road in Nassau County, N.Y., and the $500 million Union Pacific Brazos rail yard in Hearne, Texas, but combined they were only about half the dollar amount of the Mountain Valley Pipeline project. Highway and bridge construction in April made a 12 percent retreat after surging 29 percent in March due to the $1.1 billion I-405 project in Orange County, Calif., and the $855 million Grand Parkway project in Houston. April did include several notewor- thy highway and bridge projects – the $511 million Twin Ship Channel Bridge replacement in Pasadena, Texas, the $410 million I-64 widening and bridge project in Chesapeake Va., the $291 mil- lion bridge portion of the Long Island Rail Road expansion project, and a $189 million bridge replacement in Baltimore. The environmental public works cate- gories registered a mixed performance in April, with declines for river/harbor development, down 26 percent; sewer construction, down 9 percent; and water supply construction, up 2 percent. ECONOMICS MONTHLY CONSTRUCTION STARTS (Seasonally Adjusted Annual Rates, In Millions of Dollars) April 2018 Mar. 2018 % Change Nonresidential Building $211,505 $240,549 -12 Residential Building $303,767 $332,938 -9 Nonbuilding Construction $159,013 $204,734 -22 TOTAL Construction $674,285 $778,221 -13 Source: U.S. Dept. of Commerce New Construction Starts in April Pull Back 13 Percent Decreased Activity Reported for Public Works, Institutional Building and Housing; Highways Also Down. By Mark S. Kuhar

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