June construction starts up from May


Reed Construction Data (RCD) announced that the year-to-date value of construction starts through June, excluding residential contracts, totaled $126.4 billion, 13.0% more than in the same months of 2009. Individual month of June starts were 2.9% higher than in May. This is a little more than the usual seasonal gain in June.

The value of starts has now been steady for four months after allowing for seasonality. Current starts are 46% above the low point last June but remain 25% below the prerecession peak. The value of starts is expected to be about steady in the coming months and then begin to rise at the end of the year.

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 economic environment for construction soured in June with declines in buyer confidence and weaker growth in consumer spending and business investment. The causes were the end of the homebuyer tax credit and the reversal of temporary hires for the Census. The recovery is not faltering, but briefly slowing, after two exogenous bursts in spending and the continued ebbing of the boost from the variety of federal stimulus programs which Congress has refused to extend at the same spending level.

June’s heavy construction starts fell 9.1% from a very strong May, but the year-to-date total is 16.4% above 2009. This reflects the surge and ebb of federal stimulus spending over the past year, plus recent cutbacks in state and local construction spending. Both federal and local funds will continue to shrink. So heavy spending will slip slightly lower through 2011. The drop will be restrained by increases in site development for expanded private construction beginning at year-end and small gains for private transportation and communications facilities.

Non-residential building starts rose 10.4% to nearly double the year-ago level. All major categories had significant gains. A billion-dollar-plus of extra military projects was offset by a similar drop in stadium projects. Private developers started 29% ($7.5billion) more “for lease” projects in June than in May. This suggests that they anticipate more profitable operating conditions when the buildings are completed.

Click Here to view the RCD news release.