Rock Products

MAY 2018

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64 • ROCK products • May 2018 www.rockproducts.com ECONOMICS At a seasonally adjusted annual rate of $708.1 billion, new construction starts in February slipped 3 percent from the previous month, according to Dodge Data & Analytics. The reduced activity in February followed a 2 percent decline in January, as the early months of 2018 are showing some loss of momentum after the 12 percent increase reported back in December. Highway and bridge construction grew 11 percent in February. However the non- building construction sector, comprised of public works and electric utilities/gas plants, fell 23 percent in February, result- ing in the decline for total construction starts for the second month in a row. In contrast, nonresidential building grew 5 percent in February, continuing the strengthening trend, which resumed in December, and residential building improved a slight 1 percent. "The 152 average for the Dodge Index during the first two months of 2018 is the same as the 152 average reported for the fourth quarter of 2017, as the pace of construction starts viewed over several months seems to have lev- eled off," stated Robert A. Murray, chief economist for Dodge Data & Analytics. "What's important to keep in mind is that the moderately subdued amount for total construction starts during the first two months of 2018 reflects diminished activity by public works and electric utilities, which given their inher- ent volatility are likely to bounce back over the next month or two. Compared to last year's fourth quarter, the first two months of 2018 have seen further increases for nonresidential building, helped by its institutional building seg- ment, and residential building, helped by multifamily housing. This suggests that the construction expansion, while slowing, is still in progress. "It's true that the construction industry is now seeing more headwinds," Murray continued. "Material prices have risen over the past year, and the tariffs on steel and aluminum announced by the Trump Administration will lead to further price hikes. The Federal Reserve is tightening monetary policy, and concerns about inflation have contributed to rising long- term interest rates. The prospects of an infrastructure program getting passed by Congress this year remain uncertain, against the backdrop of a mounting fed- eral budget deficit. At the same time, the economy is expected to get a near term lift from tax reform, which would benefit commercial and manufacturing build- ing, while funding from recent bond measures will support such institutional project types as school construction. On balance, the rate of growth for total con- struction is decelerating, but activity for 2018 is expected to stay at a relatively healthy amount." Nonbuilding Construction Nonbuilding construction in February was $118.2 billion (annual rate), down 23 percent from January. The electric utility/gas plant category was particu- larly weak, plunging 83 percent as the largest project entered as a February start was a $40 million electric substa- tion upgrade in California. In January, the largest electric utility project entered as a construction start was an $872 million natural gas-fired power plant in Louisiana. The public works categories as a group dropped 17 percent in February, including a 54 percent plunge for miscellaneous public works. In January, the miscellaneous public works category had climbed 22 percent, reflecting the start of the $2.0 billion NEXUS natural gas pipeline in Ohio and Michigan. In February the largest miscellaneous public works project entered as a con- struction start was a $225 million light rail project in Bellevue, Wash. The river/harbor development category also experienced a steep decline in Feb- ruary, sliding 36 percent. On the plus side, highway and bridge construction grew 11 percent in Febru- ary, climbing back to within 2 percent of last year's average monthly pace. Large highway and bridge projects entered as New Construction Starts in February Recede 3 Percent Highway and Bridge Construction Grew 11 Percent But Nonbuilding Construction Fell 23 Percent. By Mark S. Kuhar YEAR-TO-DATE CONSTRUCTION STARTS (Unadjusted Totals, in Millions of Dollars) Feb. 2018 Jan. 2017 % Change Nonresidential Building $246,663 $236,037 +5 Residential Building $343,281 $338,678 +1 Nonbuilding Construction $118,205 $153,949 -23 TOTAL Construction $708,149 $728,664 -3 Source: U.S. Dept. of Commerce

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