Rock Products

NOV 2018

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64 • ROCK products • November 2018 The value of new construction starts in August decreased 9 percent from the previous month to a seasonally adjusted annual rate of $741.9 billion, according to Dodge Data & Analytics. The August downturn for total con- struction starts matched the 9 percent decline reported for July, as activity in the latest two months pulled back after the sharp increases in May (up 14 per- cent) and June (up 10 percent). By major sector, weaker activity was reported in August for nonresiden- tial building, down 19 percent; and residential building, down 7 percent. Nonbuilding construction advanced 6 percent, reflecting a steady performance by public works as well as improvement for electric utilities following depressed activity earlier this year. Highway and bridge construction slipped 4 percent. "The pace of construction starts weak- ened substantially in August, but remained within the range of activity witnessed so far in 2018, admittedly at the low end," stated Robert A. Murray, chief economist for Dodge Data & Ana- lytics. "For nonresidential building, the boost coming from several very large projects was not as strong as what took place in late spring, even with the August start of those projects. Accordingly, it would be too early to say that nonresidential building has already peaked and is now retreating, given the volatility that arises in the monthly data from the presence or absence of very large projects. Market fundamentals affecting commercial building such as occupancies have yet to weaken discernibly, and funding for such institutional projects as school construction remains supportive. For residential building, multifamily hous- ing appears to be easing back in a broad sense from the strength shown earlier in 2018, and a similar pattern could be emerging for single family housing. Even so, on a year-to-date basis, resi- dential building continues to register growth. As for public works, it's still on an upward track, helped this year by increased construction starts for high- ways and environmental projects like storm sewers, while pipeline and rail transit projects are staying close to the brisk pace reported in 2017." Nonresidential Building Nonresidential building in August fell 19 percent to $255.2 billion (annual rate), which followed a 22 percent decline in July from an unsustainably high June amount. June had been boosted by such projects as a $6.5 billion uranium pro- cessing facility in Oak Ridge, Tenn., and the $1.8 billion Spiral office tower in the Hudson Yards district of New York, while July included the start of a $2.4 billion petrochemical plant in the Hous- ton area and a $750 million Facebook data center in Huntsville, Ala. By contrast, the largest nonresidential building project in August was the $520 million California state government office building in Sacramento that will house staff from the California Natural Resources Agency, among other state departments. If nonresidential building projects valued at $750 million or more are excluded, nonresidential building would have been down a more moder- ate 5 percent in August. The commercial categories as a group dropped 23 percent in August. Office construction retreated 17 percent, but there were still several noteworthy projects, including the Facebook data center in Los Luna, N.M., a $120 mil- lion Iron Mountain data storage center in Phoenix, and the $111 million office portion of a $150 million mixed-use research building in Cambridge, Mass. Hotel construction in August fell 39 percent relative to a strong July that included the start of the $450 million Omni Seaport Hotel in Boston. The largest hotel projects that reached groundbreaking in August were a $110 million Homewood Suites hotel in Boston and a $69 million Marriott AC hotel in Ft. Worth, Texas. The other commercial categories also weakened in August, with stores and shopping centers, down 15 percent; warehouses, down 22 percent; and commercial garages, down 26 per- cent. The warehouse category received some support in August from the start of a $100 million Amazon distribution center in Kernersville, N.C. Manufac- turing plant construction in August plunged 53 percent from July. The largest manufacturing plant projects in August were a $180 million paper ECONOMICS MONTHLY CONSTRUCTION STARTS (Seasonally Adjusted Annual Rates, In Millions of Dollars) Aug. 2018 July 2018 % Change Nonresidential Building $255,183 $316,663 -19 Residential Building $307,028 $330,852 -7 Nonbuilding Construction $179,725 $169,998 +6 TOTAL Construction $741,936 $817,513 -9 Source: U.S. Dept. of Commerce August Construction Starts Fall 9 Percent Nonresidential Building Slides Further, Housing Retreats, Highway and Bridge Construction Down. By Mark S. Kuhar

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