Reed Construction Data (RCD) announced today that the year-to-date value of construction starts through July 2009, excluding residential contracts, totaled $131.3 billion, 15.1% less than in the same period in 2008. Starts unexpectedly fell $15 billion in June and then jumped $22 billion in July. Every construction category rose substantially in July after dropping substantially in June.

The early summer flip-flop is likely largely due to random factors, but the greater apprehension about the depth and length of the recession in June than in July also played a role. The June-July average is on track with expected trends at mid-year and the forecasted trend for the end of the recession and the initial recovery later in 2009 and into 2010.

The June-July starts average is 19% below the May starts total. Nearly half of the decline is due to usual seasonal trends, with the balance due to the recession-driven decline in market activity. The nominal decline is similar for both non-residential buildings and heavy projects. However, adjusting for the usual seasonality shows modest declines for heavy projects and institutional buildings and a steep decline for developer-financed projects, such as offices, retail and warehouses.

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.

The relatively strongest markets in June-July were energy-related manufacturing, hotels, education and highway paving, with a boost from stimulus plan funding. The full impact of the recession has yet to reach energy facilities and education, but will be felt by year-end.

The relatively weakest sectors in June-July were offices, warehouses, parking garages and nursing homes. Each of these was down about -40% to -50% from May. Hospital starts, after adjusting for seasonality, were off about 30%. Hospital managers are uncertain whether to expect cuts in their reimbursement rates or a massive influx of new taxpayer-subsidized customers. Recent falling support for “Obama-Care” suggests that the investment caution may ease within a few months.

Value of United States Construction Starts — July 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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