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Page 78 of 123 ROCK products • August 2018 • 77 Aggregates Industry Almanac Economic Update funding for career and technical education and for the Trump administration to avoid a damaging trade war. "The prediction has been that publicly financed construction spending would rise in America," said Associated Builders and Contractors Chief Economist Anirban Basu. "The logic of this is rooted in two basic factors. The first is that the ongo- ing economic expansion, now in its 10th year, has steadily improved fiscal conditions in state and local government. With more money to spend, more communities are empow- ered to deal with deferred maintenance and even to expand the capacity of certain key infrastructure, whether roads, mass transit, wastewater treatment plants or water systems. "The other factor relates to a political cycle," said Basu. "Increasingly, policymakers have been making the case – and much of the electorate seems convinced – that stepped-up infrastructure investment is needed. Accordingly, in recent years, 31 states have expanded their transportation fund- ing, including 24 of them by raising state gas taxes. Not surprisingly, public construction spending is higher on month-over-month and year-over-year bases. "What has been less clear is whether privately financed construction would continue to rise," said Basu. "While the economy remains strong, a number of headwinds have formed, particularly concerns regarding tariffs and trade wars. Construction material prices have already begun to surge, in part because of trade disputes involving materials such as softwood lumber, steel and aluminum. This increases project costs without offering developers and their financiers any offsetting commercial benefit. "Moreover, fears of a full-blown trade war between the United States and NAFTA partners, the European Union and/or China have likely resulted in some businesses and investors adopting a wait-and-see attitude," said Basu. Construction Starts Climb At a seasonally adjusted annual rate of $783.6 billion, new construction starts in May advanced 15 percent from April, according to Dodge Data & Analytics. The increase follows a 12 percent decline in April, and shows total construction activity reaching the highest level reported over the past eight months. The lift in May came from substantial gains for nonbuilding construction, up 39 percent and nonresidential building, up 18 percent as both sectors benefitted from the start of sev- eral very large projects. Highway and bridge construction dropped 26 percent. Nonbuilding construction, and specifically its public works segment, was boosted by the start of three large natural gas pipelines with a combined construction start cost of $4.6 bil- lion, plus $1.4 billion related to the start of an environmental cleanup project at the Los Alamos National Laboratory in New Mexico, a $1.4 billion rail transit project in Los Angeles and a $1.1 billion rail transit project in the Boston area. Nonresidential building was aided by the start of a $1.0 billion Facebook data center in Nebraska, the $764 million expansion to the Washington State Convention Center in Seattle and a $740 million airport terminal project at Salt Lake City International Airport. Meanwhile, residential building in May held steady with its April pace. Through the first five months of 2018, total con- struction starts on an unadjusted basis were $299.9 billion, down 3 percent from the same period a year ago. "During the first five months of 2018, total construction starts have shown an up-and-down pattern, with May coming in strong after a subdued April," stated Robert A. Murray, chief economist for Dodge Data & Analytics. "Much of the volatility in early 2018 has come from the public works sector, affected by the presence of unusually large project starts during a given month such as what took place in May. In addition, the nonresidential building sector showed resilience in May, bouncing back after a lackluster performance in April. "On balance, the pace of total construction starts is staying close to the levels achieved over the past year, when activity grew 5 percent," Murray continued. "It's true that the con- struction industry is facing increased headwinds, such as higher material prices and the recent pickup in interest rates, but to this point they have not yet produced a discernible negative impact on the overall level of construction starts. On the plus side, the public works and institutional build- ing sectors continue to benefit from the state and local bond measures passed in recent years. The public works sector should also benefit from the increased federal funding for transportation projects included in the March 2018 federal appropriations bill. While market fundamentals such as rents and vacancies have weakened for multifamily housing, they still remain relatively healthy for warehouses and offices. Bank lending standards for nonresidential building projects have eased slightly, and the recent rollback of Dodd-Frank regulatory constraints on mid-size regional banks may lead to more funding for construction projects in the near term." Nonbuilding Construction – Spending in May was $222.1 billion (annual rate), rebounding 39 percent after sliding 23 percent in April. The public works project types as a group surged 47 percent, boosted by a 169 percent jump by the miscellaneous public works category that includes pipelines, rail transit and site work. There were three substantial natural gas pipeline projects entered as construction starts in May – the $2.1 billion Moun- taineer Xpress Pipeline in West Virginia, the $1.9 billion Gulf Coast Express Pipeline in Texas and the $600 million Gulf Xpress Project that involves new compressor stations in Ken- tucky, Tennessee and Mississippi. In addition, there were two substantial rail transit projects

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