Construction Stayed Weak In New Beige Book Survey; NAHB Says Multifamily Improved
“Reports from the 12
Federal Reserve districts indicated that economic activity continued to expand
at a modest pace, though some districts noted mixed or weakening activity,” the
Fed reported on Sept. 7 in the latest “Beige Book,” a compilation of informal
soundings of businesses in each district, which is referenced by the name of
its headquarters city. “Several districts also indicated that recent stock market
volatility and increased economic uncertainty had led many contacts to
downgrade or become more cautious about their near-term outlooks.
“Most districts characterized commercial real estate and construction activity as weak or little changed, but improvements were noted in several areas….Construction-related manufacturing was characterized as weak in the Dallas and Philadelphia districts…Home construction was down or stagnant in most districts, with the exception of Minneapolis and Kansas City. However, several districts indicated an improvement in home remodeling activity, and the New York, Philadelphia and Cleveland districts reported increased demand for multifamily housing projects.
“Commercial construction was characterized as weak or limited by Cleveland, Atlanta, Chicago and Kansas City, although Atlanta noted some strength in the health-care sector. St. Louis described conditions as mixed, with some improvement in education and energy-related construction, while Minneapolis district contacts reported an increase in small retrofitting projects and rebuilding in flood-damaged areas. The Chicago district noted continued strength in industrial construction, particularly in the automotive sector. Credit for commercial development remained an obstacle for small retailers in the Richmond district, although Boston said aggressive competition among lenders led to reduced borrowing rates.
“The majority of districts reported fewer price pressures, but input costs continued to rise in select industries. The New York, Philadelphia, Cleveland, and San Francisco districts noted some stabilization or decline in raw materials prices but Chicago said elevated commodity prices continued to put pressure on costs, particularly copper and steel….The Kansas City district reported construction materials prices as steady, excluding prices of petroleum-based products such as roofing shingles and asphalt, which continued to rise.”
“The index and all of its components are scaled so that any number over 50 indicates that more respondents report conditions are improving than report conditions are getting worse. In the second quarter of 2011, a majority of developers saw improvements in the production of low-rent and market-rate units.
“‘Multifamily rental construction is trending upward, and it is definitely the brightest sector in the broader housing market,’ said NAHB Chief Economist David Crowe. ‘However, the entire housing market continues to be very fragile and subject to many external pressures, including an ongoing shortage of financing for new projects.’
“Looking forward, developers’ expectations about multifamily construction for the next six months improved in the second quarter in all three market components: low-rent, market-rate-rent and for-sale multifamily
“‘Even though multifamily is trending upward, production is still very low in a historic context and in the context of what we project is necessary to meet long-term demand,’ Crowe said.”
Total separations (quits, layoffs and discharges, retirements and other) also held nearly steady in the private sector (3.3 percent in July, 3.4 percent in June and 3.3 percent in July 2010) but dropped in construction (5.9 percent in July, 6.7 percent in June and 6.1 percent in July 2010). On the whole, the data suggest mixed but worse conditions in construction than overall.
Total revenue of architectural and related services firms in the second quarter increased 8 percent from the first quarter, not seasonally adjusted, and 13 percent from the second quarter of 2010, the Census Bureau reported on Sept. 8 in its Quarterly Selected Services Report. Revenue of engineering services firms increased 2 percent and 2.6 percent, respectively.
New orders for U.S. manufactured goods (excluding semiconductor manufacturing) jumped 2.4 percent, seasonally adjusted, from June to July, and 13 percent for the first seven months of 2011 compared with the same period of 2010, Census reported on August 31. Sustained increases in new orders can signal demand for factory construction. New orders for construction materials and supplies rose 0.4 percent for the month and 3.6 percent year-to-date; orders for construction machinery, typically a very volatile series, climbed 5.7 percent for the month and 45 percent year-to-date.
“Most districts characterized commercial real estate and construction activity as weak or little changed, but improvements were noted in several areas….Construction-related manufacturing was characterized as weak in the Dallas and Philadelphia districts…Home construction was down or stagnant in most districts, with the exception of Minneapolis and Kansas City. However, several districts indicated an improvement in home remodeling activity, and the New York, Philadelphia and Cleveland districts reported increased demand for multifamily housing projects.
“Commercial construction was characterized as weak or limited by Cleveland, Atlanta, Chicago and Kansas City, although Atlanta noted some strength in the health-care sector. St. Louis described conditions as mixed, with some improvement in education and energy-related construction, while Minneapolis district contacts reported an increase in small retrofitting projects and rebuilding in flood-damaged areas. The Chicago district noted continued strength in industrial construction, particularly in the automotive sector. Credit for commercial development remained an obstacle for small retailers in the Richmond district, although Boston said aggressive competition among lenders led to reduced borrowing rates.
“The majority of districts reported fewer price pressures, but input costs continued to rise in select industries. The New York, Philadelphia, Cleveland, and San Francisco districts noted some stabilization or decline in raw materials prices but Chicago said elevated commodity prices continued to put pressure on costs, particularly copper and steel….The Kansas City district reported construction materials prices as steady, excluding prices of petroleum-based products such as roofing shingles and asphalt, which continued to rise.”
Multifamily Housing
“The multifamily housing market continued to show improvement in the second quarter of 2011, as the Multifamily Production Index…increased for the fourth consecutive quarter,” the National Association of Home Builders, which compiles the MPI, reported on Sept. 8. “The MPI rose from 41.7 in the first quarter of the year to 44.4 in the second quarter. It is the highest quarterly reading since 2006, and continues the trend of generally improving conditions in the market for new multifamily housing that has emerged since the MPI dropped to a record low of 16.0 in the third quarter of 2008. The index provides a composite measure of three key elements of the multifamily housing market: construction of low-rent units, construction of market-rate-rent units, and construction of ‘for sale’ units.“The index and all of its components are scaled so that any number over 50 indicates that more respondents report conditions are improving than report conditions are getting worse. In the second quarter of 2011, a majority of developers saw improvements in the production of low-rent and market-rate units.
“‘Multifamily rental construction is trending upward, and it is definitely the brightest sector in the broader housing market,’ said NAHB Chief Economist David Crowe. ‘However, the entire housing market continues to be very fragile and subject to many external pressures, including an ongoing shortage of financing for new projects.’
“Looking forward, developers’ expectations about multifamily construction for the next six months improved in the second quarter in all three market components: low-rent, market-rate-rent and for-sale multifamily
“‘Even though multifamily is trending upward, production is still very low in a historic context and in the context of what we project is necessary to meet long-term demand,’ Crowe said.”
Construction Employment
Job openings as a percent of private-sector employees increased to 2.6 in July, seasonally adjusted, from 2.5 in June and 2.3 in July 2010, the Bureau of Labor Statistics reported Sept. 7. For construction, the 1.3 percent July rate was slightly higher than in June (1.2 percent) but below the July 2010 rate (1.6 percent). The rate of hires held nearly steady for the private sector (3.4 percent in July, 3.5 percent in June and 3.4 percent in July 2010) but was mixed in construction (6 percent in July, 6.5 percent in June and 5.9 percent in July 2010).Total separations (quits, layoffs and discharges, retirements and other) also held nearly steady in the private sector (3.3 percent in July, 3.4 percent in June and 3.3 percent in July 2010) but dropped in construction (5.9 percent in July, 6.7 percent in June and 6.1 percent in July 2010). On the whole, the data suggest mixed but worse conditions in construction than overall.
Total revenue of architectural and related services firms in the second quarter increased 8 percent from the first quarter, not seasonally adjusted, and 13 percent from the second quarter of 2010, the Census Bureau reported on Sept. 8 in its Quarterly Selected Services Report. Revenue of engineering services firms increased 2 percent and 2.6 percent, respectively.
New orders for U.S. manufactured goods (excluding semiconductor manufacturing) jumped 2.4 percent, seasonally adjusted, from June to July, and 13 percent for the first seven months of 2011 compared with the same period of 2010, Census reported on August 31. Sustained increases in new orders can signal demand for factory construction. New orders for construction materials and supplies rose 0.4 percent for the month and 3.6 percent year-to-date; orders for construction machinery, typically a very volatile series, climbed 5.7 percent for the month and 45 percent year-to-date.
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