A generally negative April is brightened somewhat by increases in institutional and heavy engineering starts; industrial starts take a big hit.
Reed Construction Data announced the value of April construction starts, excluding residential contracts, fell 4.9% to $22.6 billion after rocketing 47.8% in March.
Starts were down 7.8% from April 2013. Year-to-date starts data, which totaled $81.9 billion, were 3.6% lower than for the same period in 2013.
“April starts data once again point to the negative impact adverse weather is having on construction activity,” stated Bernard Markstein, U.S. chief economist, Reed Construction Data.
Commercial starts dropped dramatically in April, giving back over half of their March gain. That left year-to-date commercial starts 28.2% lower than the same period last year. The next few months will demonstrate whether this poor performance is weather-related or an indication of a more serious underlying problem.
Lodging (hotel and motel) starts throttled back significantly in April, down by a third. An unusually large March 2013 starts figure continues to distort the comparison of the year-to-date number for lodging, which was down 59.6%. Although April’s $2.3 billion year-to-date starts total was not spectacular, it was the second highest total (after 2013) since April 2009.
Year-to-date retail starts were also at their second highest level since 2009 (essentially at the same level as in 2009), but down 27.1% from 2013. Given that retail construction spending has struggled in recent months, declining on a seasonally adjusted basis from December through March, the lethargic performance of retail starts is of concern.
One positive for this group is that both private office and government office starts were up on a year-to-date basis.
Industrial (manufacturing) building starts have also struggled this year, with April taking a real hit—down 75.0% from March. Year-to-date starts were down a more modest 5.6%. The hope is that this year’s poor weather has adversely affected starts and, as the weather improves, so will starts.
Institutional building starts posted a large increase for the second month in a row, up 24.0% in April after increasing 39.2% in March. Year-to-date starts were 9.1% higher than last year. Much of the recent improvement is due to starts for schools and colleges, which were up 62.8% in April and 28.8% in March, and accounted for more than half of the starts for the group. Year-to-date starts were up 5.3%. Another contributor was hospital and clinic starts, which although down for the month, were up 21.1% on a year-to-date basis.
Heavy engineering (non-building) starts represent another positive area. Starts were up 1.2% in April following a 19.9% jump in March. Year-to-date starts were 13.1% higher than the same period in 2013. Road and highway starts were the source of much of this strength, surging 50.8% after tumbling 13.8% in March. They were 12.9% higher on a year-to-date basis. Meanwhile, water and sewage starts were up 9.7% on a year-to-date basis.
The April starts numbers were generally negative, with only a few bright spots. The year-to-date numbers were somewhat better. Only heavy engineering was showing any evidence of improvement. The weather may still be responsible for the poor starts numbers. However, unless there is real improvement in coming months, this explanation will no longer be viable.
“Many factors still indicate the economy is on the mend from the brutal winter and difficult spring," stated Markstein. “Reed is comfortable with our forecast of nonresidential construction starts improving significantly in coming months and eventually exceeding last year’s starts numbers.”
To read the complete report or download the PDF, visit http://www.reedconstructiondata.com/market-intelligence/articles/nonresidential-construction-starts-slip-back-in-april.
Since starts data are not seasonally adjusted (NSA), caution should be used in analyzing monthly movements. Year-over-year comparisons are often used, as they remove much of the seasonal effects.
The value of construction starts each month is summarized from the Reed database of all active construction projects in the U.S., excluding residential construction. Missing project values are estimated with RSMeans building cost models.
A start is determined by taking the announced bid date and adding 30 days. It is then assumed the project will actually break ground within 30-60 days of the start date. Reed continues to follow the project via our network of researchers, so if the project is abandoned or rebid, the start data are subsequently updated to reflect the new information.
About Reed Construction Data
Reed Construction Data, a division of Reed Business Information and the Inaugural Strategic Partner of the AIA, is a leading North American provider of construction information. Reed provides actionable insight to construction professionals through a diverse portfolio of innovative products and services, including national, regional and local construction project data, accurate and reliable construction cost data, effective marketing solutions and dynamic market intelligence. To learn more about Reed, visit www.reedconstructiondata.com