The economic environment for nonresidential buildings dropped again in the last month. There was a steep drop in the expected profitability of new commercial buildings. Construction and financing costs both increased while occupancy declined and the increase in rental slipped to near 0.0%. The environment also weakened for institutional buildings and non-building projects but that information is reported with a longer lag so it largely does not in the table this month. But tax receipts, investment earnings and public budget balances are all clearly weakening, reducing available construction funds.

Fragments of data also show that fee income is falling. This includes highway and bridge tolls, admissions to cultural facilities and water and sewer fees due to the rising building vacancy rate. Also the fuel tax/trust fund system for highway funding can not cope with declining receipts with costs rising at a 20% annual pace. Contract letting has slowed to avoid writing bad checks.

Key Indicators of the U.S. Market Environment — Aug 2008
Commercial and Industrial Construction (Driven mainly by cyclical factors)

	Year Ago	Previous Month or Qtr.	Latest		Level	Recent Trend	Impact on Const.
Commercial
Dow Jones composite REIT, index (Dow Jones)	226	196	W/E Aug 20th	198	Average	Falling
10-Year T-bill rate, % level (FRB)	4.7	3.90	W/E Aug 15th	3.91	Low	Steady
Office rent, 54 metro areas, % change y/y (PPR)	8.3	6.5	Q2	4.2	High	Falling
Office vacancy rate, 54 metro areas, % level (PPR)	14.8	15.2	Q2	15.6	High	Steady
Office employment, % change y/y (P&PR)	1.3	0.6	Q2	0.0	High	Falling
Office construction starts ($s), 3-mon. ave. y/y (RCD)	18	25	July	19	High	Falling
Hotel room rate, 54 metro areas, % change y/y (PPR)	6.3	4.4	Q2	4.4	High	Falling
Hotel occupancy rate, 54 metro areas, % level (PPR)	67.1	66.7	Q2	66.4	Average	Falling
Airline revenue passenger miles, % change y/y (RCD)	2.7	-0.5	Jul	-0.4	Average	Falling
Real price of gasoline (July 08 = 100), $s/gal. (U.S. Energy Dept.)	3.14	4.11	Jul	4.09	High	Falling
Hotel construction starts ($s), 3-mon. ave. y/y (RCD)	22	-47.0	Jul	-17.0	High	Falling
Retail rent, 54 metro areas, % change y/y (PPR)	3.4	0.7	Q2	0.0	Average	Falling
Retail vacancy rate, 54 metro areas, % level (PPR)	10.2	11.3	Q2	11.8	Average	Rising
Retail sales, % change y/y (U.S. Census Bureau)	4.2	3.3	July	2.9	Average	Falling
Consumer confidence index (The Conference Board)	111.9	51	July	51.9	Low	Falling
Consumer real income growth, % change y/y (U.S. Commerce Dept.)	-0.8	7.1	July	11.2	High	Rising
Retail construction starts ($s), 3-mon. ave. y/y (RCD)	5.9	-2.3	July	-4.5	High	Falling
Industrial
Warehouse rent, 54 metro areas, % change y/y (PPR)	3.8	1.5	Q2	0.4	Low	Falling
Warehouse vacancy rate, 54 metro areas, % level (PPR)	8.6	9.1	Q2	9.4	Average	Falling
Business inventory, % change y/y (U.S. Census Bureau)	3.7	5.2	June	5.6	Average	Rising
Business sales, % change y/y (U.S. Census Bureau)	2.9	6.9	June	9.2	Average	Steady
Warehouse construction starts ($s), 3-mon. ave. y/y (RCD)	-33.0	-17.0	July	7.0	Low	Falling
Capacity utilization rate, % level (FRB)	80.1	77.6	July	77.8	Average	Steady
Manufacturing production index (FRB)	115.3	113.9	July	0.0	Low	Steady
Goods Exports $ billions (U.S. Commerce Dept.)	95	111	June	117	High	Rising

Abbreviations: y/y = year over year; WE = week ending; FRB = Federal Reserve Board;
PPR = Property & Portfolio Research; RCD = Reed Construction Data.
Table: Reed Construction Data and Reed Construction Data - CanaData.

Key Indicators of the U.S. Market Environment — Aug 2008
Institutional and 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.
Institutional
State & local govt. capital spending, $ billions (U.S. Commerce Dept.)	337	345	Q2	352	High	Rising
State & local government tax receipts, $ billions (U.S. Commerce Dept.)	1286	1314	Q1	1317	High	Rising
State budget reserves, % of Exp. (National Governors assn.)	10.5	n/a	FY 08	8.0	High	Falling
Stock market index (Dow Jones Industrial)	13,851	11,843	W/E Jul 14th	10,963	High	Falling
K-12 enrollment, millions of people (U.S. Education Dept.)	55.762	n/a	2007-08	55.966	Average	Steady
Higher-education enrollment, millions of people (U.S. Education Dept.)	17.598	na/	2007-08	18.264	High	Rising
Hospital receipts, $ billions (U.S. Health & Human Services Dept.)	648.2		2007	696.7	High	Rising
Prison population, % change y/y (Pew Charitable Trust)	4.5	N/A	2006-07	2.5	High	Falling
Heavy/Engineering
Federal highway trust fund, $ billions (U.S. Treasury Dept.)	15,002	10,659	Jun	9,979	Low	Falling
Electric power capacity utilization rate, % level (FRB)	84.9	84.9	Jun	86.5	High	Steady
Airline revenue passenger miles, billions (RCD)	2.7	1.4	Jun	-0.5	Average	Falling
State & local govt. capital spending, $ billions (U.S. Commerce Dept.)	337	345	Q2	352	High	Rising
State and local government tax receipts, $ billions (U.S. Commerce Dept.)	1286	1314	Q1	1317	High	Rising
Heavy contractor employment, 000s (U.S. Labor Dept.)	1008.1	964.90	Jun	960.0	High	Falling
Construction equipment shipments, % change y/y (U.S. Census Bureau)	-26.8	6.8	Jun	0.4	Average	Rising

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

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