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Heavy Construction Environment Now Weakening

0 217 Market Intelligence

The only improving heavy construction market drivers are airline passenger miles and construction equipment shipments. Airline traffic is a long lead driver. The rise in equipment shipments reflects mostly rising exports and the delayed replacement of aged equipment at equipment rental houses. The short lead indicators are weakening. This includes federal stimulus funds and state and local government appropriations from general taxes, says Reed Construction Data chief economist Jim Haughey.

The only improving heavy construction market drivers are airline passenger miles and construction equipment shipments. Airline traffic is a long lead driver. The rise in equipment shipments reflects mostly rising exports and the delayed replacement of aged equipment at equipment rental houses. The short lead indicators are weakening. This includes federal stimulus funds and state and local government appropriations from general taxes. Heavy construction spending, adjusted for inflation, has decline from a year ago with further small declines expected over the next year.

State tax receipts appear to have stabilized at a low level during the spring but local government tax receipts, heavily property taxes, are still declining.

Other market drivers are stable but still very low. This results in essentially a no change outlook for heavy construction spending through 2011.

Key Indicators of the U.S. Market Environment — July 2010
Heavy/Engineering Construction
(Driven by demographics and government finances, as well as cyclical factors)

  Year
Ago
Previous
Month
or Qtr.
Latest Level Recent
Trend
Impact
on Const.
Heavy/Engineering
Electric power capacity utilization rate,
% level (FRB)
79 80 Jun 82 Low Steady
Airline revenue passenger miles,
billions (RCD) (ann. % change)
-15.2 16.0 Jun 17.7 Average Rising
State & local govt. capital spending,
$ billions (U.S. Commerce Dept.)
348 351 Q1 337 Low Falling
State and local government tax receipts,
$ billions (U.S. Commerce Dept.)
1272 1279 Q1 1296 Low Steady
Heavy contractor employment, 000s
(U.S. Labor Dept.)
841 802 Jun 803 Low Steady
Construction equipment shipments,
$M (U.S. Census Bureau)
1721.0 2238.0 May 2362.0 Low Rising

Abbreviations: y/y = year over year; FRB = Federal Reserve Board; RCD = Reed Construction Data
Table: Reed Construction Data and Reed Construction Data - CanaData

by Jim Haughey

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