May construction starts up 16% from April

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Reed Construction Data (RCD) announced that the year-to-date value of construction starts through May, excluding residential contracts, totaled $105.2 billion, 9.8% more than during the same months in 2009. Individual month of May starts were 16.3% higher than in April.

This is a little more than the usual seasonal gain in May. The value of starts has now been about steady for three months after allowing for seasonality. Current starts are 50% above the low point last June but remain 25% below the pre-recession peak. The value of starts is expected to be 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 is clearly improving. Contractors have kept employment steady in the last three months and buildings funded by the stimulus plan are being started. The long, sharp rise in the commercial vacancy rate is now slowing with scattered reports of rising occupancy rates.

The slide in heavy project starts paused in May. Starts rose 20.0% from April in line with the usual seasonal trends and were off 20% from the stimulus-boosted peak last August. The stimulus impact in the heavy market continues to ebb month to month. But no further significant decline is expected as delayed transportation and water/sewer projects replace slipping highway project starts.

May non-residential building starts were 14% above April, reversing that month’s decline. Typically, there is very little seasonal pickup in May. Total non-residential building starts were 5% below the 2006 to 2008 average.

Although off by 3.6% last month, institutional starts remain relatively high. Commercial starts jumped 52% from an unusually weak April but remain more depressed than institutional starts. There was a significant May rebound in all commercial categories except hotels which slipped a further 40%.

Click Here to view the RCD news article.

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