Construction employment climbed in November; value put in place was flat in October
The value of construction put in place remained essentially unchanged for the third straight month in October, at a seasonally adjusted annual rate of $1.01 trillion, the Census Bureau reported Wednesday. The October number was 7% higher than in October 2003, and the year-to-date total for January-October 2004 was 9% higher than in the same span of 2003. Private residential construction was 11% higher than in the year-ago month and 14% higher on a year-to-date basis; private nonresidential construction improved by 2.5% and 3.3%; and public construction was up by 3.5% and 3.1%. McGraw-Hill Construction, which counts the full value of new construction contracts in their first month, said on Wednesday that contracts rose 4% in October and 9% year-to-date for: new multi-unit housing (-1% for the month, +16% year-to-date), nonresidential building (+11% and +3%), and nonbuilding construction (+11% and 0). However, neither Census nor McGraw-Hill adjusts for price increases, which continue to be significant for construction materials, as indicated by this week's “Beige Book” and Institute for Supply Management (ISM) surveys.
The Beige Book, an informal survey of current business activity in each of the 12 Federal Reserve Districts that was released Wednesday, showed “continued economic growth from mid-October to mid-November, with a number of areas improving. Eleven Districts reported expanding economic activity…only the Cleveland District reported little change….Commercial real estate markets remained weak, with high vacancies and low--even falling--rents. Nevertheless, several Districts noted that levels of excess capacity continued to ebb. Districts reported that nonresidential construction continues to be at low levels. However, leasing activity was up in the Dallas and Richmond Districts. The Atlanta and Minneapolis Districts noted lower commercial vacancy rates, and San Francisco District contacts indicated that office and industrial vacancy rates were edging down. In contrast, the New York District reported weakening in commercial markets, where strong leasing activity was outpaced by an increased availability of space….Continued cost increases for some building materials were reported in the Atlanta, Cleveland, Kansas City, Minneapolis, New York, Richmond and San Francisco Districts. Cement has been in short supply, and prices have risen for both concrete and cement. Steel prices also rose. While construction-related steel shortages eased in the Chicago and San Francisco Districts, there were reports of shortages of specialty steel in several Districts.”
Nonmanufacturing business activity increased in November for the 20th month in a row, according to purchasing executives in a survey ISM released today. Twelve industry groups reported growth, two indicated contraction, and three reported no change from October. About 38% of respondents and 16 out of 17 industry groups reported paying higher prices compared to October. Items important to construction that were reported in short supply included concrete (seventh straight month), roofing shingles, steel products (10th month), and trucking. Price increases were reported for aluminum, asphalt products, concrete, copper cable, diesel fuel, insulation, lumber (also reported down in price), PVC material/conduit, resin-based products, roofing shingles, steel products, and transportation/freight charges, along with many other items. On Wednesday, ISM said that manufacturing purchasing executives also reported both growing activity and higher input prices in November.
Factory orders (excluding semiconductor manufacturing) rose 0.5% in October, seasonally adjusted, after being flat in September and falling in August, Census reported Thursday. For the first 10 months of 2004, orders were 11% higher than in the same period of 2004. The data are not adjusted for price changes. Orders for construction machinery fell 3.2% in October, after increasing 3.5% in September and 15% in August; year-to-date orders were 43% ahead of January-October 2003. Orders for construction materials and supplies climbed 1.1% in October, after dropping 2% in September and rising 3.4% in August; for the year to date, orders were 13% higher than in the same months of 2003.