Reed Construction Data (RCD) announced today that the year-to-date value of construction starts through June 2009, excluding residential contracts, totaled $103.3 billion, 21.8% less than in the same period in 2008. Individual month-of-June starts decreased 71% from May, more than offsetting the 27% increase the previous month.

Every construction category declined significantly in June. The year-to-date decline is consistent with expected market trends and with other measures of construction market activity.

The May-June boom/bust is substantially random. Nonetheless, the slim starts total reported for June does signal that non-residential construction is entering the weakest period in this business cycle. But by itself, June was not as grim as the starts total suggests.

The June data incorporate an accumulation of concerns by project owners in the previous few months. The 22% year-to-date decline is a better indicator of the trend for the rest of the year than the 71% June decline. The current bid calendar suggests that much of the June drop will be reversed in the next few months.

The value of construction starts each month is summarized from RCD’s database of all active construction projects in the United States, excluding single-family homes. Missing project values are estimated using RSMeans’ building cost models.

Owners delayed or cancelled starts in June for the following reasons. The federal Highway Trust Fund and some state funds are near bankruptcy, with no alternate funding yet in place. Many states, not just California, have been forced to trim capital spending due to plunging tax receipts and rising income support program costs.

In addition, many local governments have cut investment sharply. In some cases, public officials hope to later start deferred projects with stimulus money. Significant health care spending has been put on hold until hospitals know how their federal reimbursement rates will change.

Finally, the energy projects category, which had been growing strongly, is now seeing cancellations or deferrals with the drop in energy prices and demand and the uncertainty over the pending tax on carbon. Commercial projects have been waylaid by the sharp drop in both rents and occupancy.

Value of United States Construction Starts — June 2009
(Reed Construction Data)

Source: Reed Construction Data (RCD) and Property & Portfolio Research (PPR) (www.ppr.info).
Table: Reed Construction Data – CanaData.

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