Construction spending in April totaled $1.12 trillion at a
seasonally adjusted annual rate (SAAR), down 0.4% from March and 3.9% from
April 2007, the Census Bureau reported. (Seasonal adjustment is a statistical
technique to remove normal weather or holiday-related variations; annual rate
means the monthly number has been multiplied by 12 to allow comparison to
full-year figures.)
Public construction spending slipped
0.3% for the month but rose 6.8% from April 2007; private residential spending
plunged 2.3% and 21%; and private nonresidential spending climbed 1.6% and 15%.
Among private nonresidential categories, growth was notable for lodging, 7.6%
and 45%; manufacturing, 3.5% and 25%; power, 2.9% and 33%; and office, 0.5% and
15%.
Commercial (retail, warehouse and farm) construction
was up 1.9% for the month but only 0.3% compared to April 2007. The largest
public category, educational, fell 0.3% for the month but rose 7.3% compared to
April 2007, while highway and street construction inched up 0.1% from March and
5.2% from April 2007.
New private single-family
construction tumbled 4.4% for the month and 38% from a year ago; new
multi-family rose 0.4% from March but slumped 13% from April 2007.
Gross
domestic product, net of inflation, or real GDP, increased 0.9% (SAAR) in
the first quarter, the Bureau of Economic Analysis (BEA) announced in its
“preliminary” estimate, rather than 0.6% as reported in the “advance” estimate
released in late April. One contributor
to the upward revision was real private
investment in structures, which increased 1.1% instead of shrinking 6.2%,
as estimated in the advance report. (BEA’s definition of structures includes
wells and mineshafts as well as what Census counts as construction.) The price index for real private investment
in structures climbed 2%, not 1.4% as in the advance estimate.
Price
increases continue for construction
materials. In the past few days,Data DIGestreaders have sent reports of immediate price increases for asphalt and aggregate; roofing products and metal wall panels, effective June
1-August 1; “a steel guardrail increase
of 40% since February [and] rebar for
concrete barrier jumped 23% in the last 30 days;” “a serious round of
increases [for vinyl chloride resin
for polyvinyl chloride (PVC) which] will impact pricing for plastic pipe, vinyl
siding, vinyl flooring and vinyl window pricing.”
The July futures price of natural gas, the feedstock
for PVC, hit the highest level since December 2005, following Hurricanes Rita
and Katrina. There were also multiple reports of fuel surcharges. The Energy Information Administration (EIA) reported
that the national average retail price
of highway diesel fuel dipped 1.6 cents per gallon from last week to $4.71,
68% above the year-ago level. Last year, diesel prices remained between $2.80
and $3 per gallon until late September, making it likely that surcharges based
on year-ago prices will stay very high for the next several months.
The Institute for Supply Management reported that
purchasing executives with manufacturing firms reported price increases in May for these items important to
construction: aluminum, copper wire, diesel fuel, freight and fuel surcharges,
and steel, including stainless and, structural. Steel was one of three items
reported in short supply.
EIA reported that the national average retail price of gasoline climbed to $4.03 per
gallon, up 4 cents from a week ago. Earlier, EIA had reported U.S. gasoline
demand down 0.6% this year compared with the same period in 2007. The Federal
Highway Administration reported on May 23 that vehicle miles of travel fell
4.3% from March 2007 to March 2008, the largest drop since records began in
1942. The drop in gas purchases will
lower gas tax receipts in federal and state highway trust fund accounts,
imperiling funding for new highway
construction contracts.
Data posted by the Federal Deposit Insurance Corporation
(www4.fdic.gov/QBP/index.asp) show that the number of “noncurrent” 1-4 family residential
construction loans at banks insured by the agency jumped to 6.8% of the
total outstanding amount in the first quarter of 2008 from 4.3% in the fourth
quarter of 2007 and 1.3% in the first quarter last year. For all other construction loans, noncurrent
loans climbed to 3% from 2.1% an 0.7%.
Secondary mortgage lender Freddie Mac announced
that its “Conventional Mortgage Home Price Index (CMHPI) Purchase-Only Series
registered a 10.4% drop in U.S. home values during the first quarter of 2008 on
an annualized basis, following a downward revised 9.9% annualized drop in the
fourth quarter. Over the four quarters ending with the first quarter of 2008,
home sales prices fell an average of 4.4% in the CMHPI Purchase-Only Series - the
largest annual fall in values over the 39-year history of the series. The CMHPI
Purchase-Only Series excludes all refinancings in its calculation.
Freddie Mac also produces a CMHPI Classic
Series, which includes data from both home purchase transactions and mortgage
refinancings, with the latter home values based on appraisals. The CMHPI
Classic Series indicated that home values fell 2.4% nationally during the first
quarter on an annualized basis, the steepest quarterly decline since 1971.
Over the year ending with the first quarter,
home values depreciated 0.8% on average in the Classic Series, the first annual
drop in this index over the 39 years spanned by the series. Forty-six states
registered price declines in the first quarter and 29 states had declines
measured from the same time a year ago, according to the CMHPI Purchase-Only
Series. Montana, North Dakota, South Carolina and Wyoming had modest price
gains during the first quarter. In general, states in which the local economy
remained more vibrant tended to have better home-value performance than other
states.”