Rock Products

DEC 2018

Rock Products is the aggregates industry's leading source for market analysis and technology solutions, delivering critical content focusing on aggregates-processing equipment; operational efficiencies; management best practices; comprehensive market

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64 • ROCKproducts • December 2018 New construction starts in September fell 5 percent from the previous month to a seasonally adjusted annual rate of $709.6 billion, according to Dodge Data & Analytics. The September downturn followed 9 percent declines in both July and August, as the pace of construction starts has now pulled back for the third month in a row after reaching the cur- rent year's high in June. By major sector, nonresidential build- ing weakened further in September, sliding 6 percent. Nonbuilding con- struction dropped 13 percent due to sharp retrenchment for the electric utility/gas plant category while public works held steady. Residential building was the one major sector posting a gain in September, rising 2 percent. Highway and bridge construction starts slipped 2 percent. "The pace of construction starts has clearly slowed over the past three months, following what was unsus- tainably high levels during May and June," stated Robert A. Murray, chief economist for Dodge Data & Analytics. "Since construction starts on a monthly basis are often subject to wide swings, it's useful to look at the recent pat- tern of activity on a quarterly basis," Murray continued. "After sliding 7 percent in the fourth quarter of 2017, total construction starts strengthened 3 percent in this year's first quarter and then advanced another 4 percent in the second quarter. The loss of momentum in July, August, and now September pro- duced a 7 percent decline for the third quarter, in effect returning the pace of construction starts to the level reported at the end of last year. It's true that the rate of growth for construction starts has decelerated more in 2018, but it's still too early to say that the construc- tion industry has rounded the peak and is now in decline. There are of course mounting headwinds affecting con- struction, namely rising interest rates and higher material costs, but for now these have been balanced by stronger economic growth, some easing of bank lending standards, still healthy market fundamentals for commercial real estate, and greater state financing for school construction and enhanced fed- eral funding for public works." Nonresidential Building Nonresidential building in September was $236.4 billion (annual rate), down 6 percent. The commercial building categories as a group fell 13 percent, retreating for the third month in a row after a robust June. Office construction in September dropped 38 percent from August that included groundbreaking for a $520 million California state government office building in Sacramento. By con- trast, the top three office projects that reached groundbreaking in September were smaller in scale – a $90 million office building in Allentown, Pa., an $82 million office building renovation in Woodlawn, Md., and the $75 million office portion of a $200 million mixed- use complex in Coral Gables, Fla. Stores and warehouses also weakened in September, with each registering a 4 percent decline. Hotel construction in September was unchanged from the previous month, helped by the $114 million hotel portion of the $180 mil- lion Great Wolf Resort and Water Park in the Stockton, Calif., area. The commercial garage category was the one commercial project type to report a September gain, rising 40 percent after a lackluster August. Man- ufacturing plant construction also showed improvement from a lackluster August, climbing 36 percent with the lift coming from the start of a $800 million aluminum rolling mill in Ashland, Ky., and a $190 million research and design facility expansion in Fitchburg, Wis. The institutional side of the nonresiden- tial building sector dropped 6 percent in September, a less severe decline than what was reported for commer- cial building. Educational facilities, ECONOMICS MONTHLY CONSTRUCTION STARTS (Seasonally Adjusted Annual Rates, In Millions of Dollars) Sept. 2018 Aug. 2018 % Change Nonresidential Building $236,377 $251,394 -6 Residential Building $316,635 $311,580 +2 Nonbuilding Construction $156,544 $180,422 -13 TOTAL Construction $709,556 $743,396 -5 Source: U.S. Dept. of Commerce September Construction Starts Settle Back 5 Percent Nonbuilding Construction Dropped 13 Percent; Highway and Bridge Construction Starts Slipped 2 Percent. By Mark S. Kuhar

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