On Oct. 18, Reed reported that the YTD value of nonresidential U.S. construction starts was 18% higher than in 2006. September starts were down 8.6% from August. “Because September is seasonally weaker than August, the month-to-month decline may not include any negative impact spilling over from the liquidity problems set off by the collapse of the subprime residential mortgage market. Nonetheless, the persistent surge in starts since early 2007 may be ending. The starts growth trend appears to be ebbing down to only a small margin over the rate of project cost inflation.” Both nonresidential building and “heavy engineering” were up 18% YTD. MHC and Reed collect data independently. Both report the full value of new contracts at time of start, whereas the Census Bureau reports construction spending over a project’s duration.

“Billings growth at U.S. architecture firms [a leading indicator for building construction] slowed for the second month in a row in September [to] the slowest pace of growth since June 2006, which indicates that firms and clients are starting to feel the pinch of the current slowdown in the economy,” the AIA reported on October 19. “Business conditions weakened in all regions of the country in September, with the Midwest reporting its first decline in billings since last September. Credit concerns [are] not going away. [Compared to the August survey,] In September an even higher share of respondents, 32%, reported that the credit market troubles that began in August have had an impact on their firms. And of those indicating that they have felt an impact, nearly 4 in 10 said that the impact of the credit industry troubles on projects at their firm was more severe in September than in August.” Billings at firms with residential, mixed and institutional practices dropped for the third straight month, with the latter turning negative for the first time since December 2004. Commercial/industrial firms’ billings slipped for the second straight month.

The National Association for Business Economics (NABE) reported on October 22 that the 113 corporate economists in its quarterly Industry Survey said that, on balance, “business activity, capital spending, and hiring slowed in the third quarter in response to tightening credit conditions and a rapidly deteriorating housing market….The housing market outlook turned from bad to worse: an overwhelming 98% of respondents expect a further slowdown in housing activity, and 54% expect the slowdown to be substantial. The tightening of credit conditions since early August is hurting business at 36% of firms surveyed, with financial and goods-producing sectors most severely affected.” Among the 80 respondents to a question on firms’ capital spending plans for structures over the next 12 months, 30% expect an increase, 12% expect a decrease, and 58% expect little or no change. The net percentage expecting an increase, 18%, compares to 29% in July and 8% in April.

The Federal Reserve reported in the October 17 “Beige Book,” a compilation of informal surveys of firms in the 12 Fed Districts, that “Anecdotal reports…suggest economic activity continued to expand in all Districts in September and early October but the pace of growth decelerated since August….Residential real estate markets continued to weaken, and most Districts reported additional declines in home sales, prices and construction….Commercial market fundamentals remained solid. Most Districts reported steady absorption of commercial space. Rental rates were firm to rising across Districts, with sizable increases for Manhattan office space. Construction activity continued at a steady pace overall. Some softness in commercial investment activity was noted, however, and several Districts reported a move to more conservative financing. Reports suggested developers are becoming more cautious--in some cases shelving or canceling projects….Most Districts report worker shortages in a variety of occupations, with sizable wage increases for workers in short supply. Positions mentioned as difficult to fill include…engineering, marketing, health-care, truckers, welders, ironworkers, crane operators, office workers and energy-service workers.