However, there was no good news in the last month in the economic environment for nonresidential construction. Construction spending was essentially unchanged in July after a long boom for both building and non-building projects. The value of July starts was unusually low. But this was offset by a strong rebound in August which put the July-August average right at the June level.

August starts can be interpreted two ways. The glass half empty approach would see starts continuing to trend down on an inflation adjusted basis. This would be consistent with reports of reports of slipping rental rates and rising vacancies. The alternative is to view August starts as being at a record high level, especially for institutional buildings. This is tempting but a one month surge is insufficient to counter many months of reports of worsening profit prospects for commercial projects and worsening tax-based construction funds availability for public projects.

Nonetheless, the depressed highway market will get a small boost this fall when President Bush signs the legislation to supplement the Federal Highway Trust Fund with $8 billion of general fund tax money. Some projects on hold because of expected delays in federal reimbursement will now start. Another boost will come from the bursting of the commodity bubble in late June and early July which dropped the materials price index for highway construction 1.3% in August after an 11% rise in the previous three months.

Key Indicators of the U.S. Market Environment — Sept 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)	237	201	W/E Sep 11th	201	Average	Falling
10-Year T-bill rate, % level (FRB)	4.48	3.99	W/E Sep 10th	3.65	Low	Falling
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)	29	18	Aug	9	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)	5.7	-0.4	Aug	-1.6	Average	Falling
Real price of gasoline (July 08 = 100), $s/gal. (U.S. Energy Dept.)	2.93	409.6	Aug	3.79	High	Falling
Hotel construction starts ($s), 3-mon. ave. y/y (RCD)	-11	-21	Aug	13	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)	3.6	1.5	August	1.8	Average	Falling
Consumer confidence index (The Conference Board)	105.6	51.9	Aug	56.9	Low	Rising
Consumer real income growth, % change y/y (U.S. Commerce Dept.)	-0.3	11.4	July	12.2	High	Rising
Retail construction starts ($s), 3-mon. ave. y/y (RCD)	27.0	-26.0	Aug	-28.0	High	Falling
Industrial
Warehouse rent, 54 metro areas, % change y/y (PPR)	3.8	1.5	Q2	0.4	Low	Falling
Warehouse vacancy rate, 54 metro areas, % level (PPR)	8.6	9.1	Q2	9.4	Average	Falling
Business inventory, % change y/y (U.S. Census Bureau)	3.4	5.8	Jul	6.4	Average	Rising
Business sales, % change y/y (U.S. Census Bureau)	9.3	3.7	Jul	8.7	Average	Steady
Warehouse construction starts ($s), 3-mon. ave. y/y (RCD)	0.0	-9.0	Aug	23.0	Low	Falling
Capacity utilization rate, % level (FRB)	80.1	77.6	July	77.8	Average	Steady
Manufacturing production index (FRB)	115.3	113.8	July	114.3	Low	Steady
Goods Exports $ billions (U.S. Commerce Dept.)	98	116	July	121	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 — Sept 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	Q2	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)	13,241	11,644	W/E Sep 11th	11,333	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.)	13,020	8,631	Aug	7,026	Low	Falling
Electric power capacity utilization rate, % level (FRB)	84.2	86.2	Jul	84.4	High	Steady
Airline revenue passenger miles, billions (RCD)	5.7	-0.4	Aug	-1.6	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	Q2	1317	High	Rising
Heavy contractor employment, 000s (U.S. Labor Dept.)	999	958	Aug	956	High	Falling
Construction equipment shipments, % change y/y (U.S. Census Bureau)	-19.0	8.7	Jul	5.1	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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