Census Bureau non-seasonally adjusted (NSA), constant dollar CPIP data showed that September total construction expenditures grew by 4.0% year on year (y/y), to $1217.0 billion (B). Private expenditures advanced 6.7% y/y, while, State & Local contracted by 3.1% y/y. Non-residential CPIP increased by 3.8% y/y to $569.0B. The private sector led the way with strong performances in each of: Commercial, Office, Multi-story-residential, Lodging and Recreation. The U.S. total construction market continues to perform well having recorded positive growth for 74 consecutive months on y/y comparison.
Total Construction: Table 1 presents CPIP data for total construction for both 3 and 12 month y/y metrics. Momentum, defined as 3 month minus 12 month is also shown. Momentum provides market direction with green indicating stronger activity and red indicating slowing activity. Private construction accounted for 74.3% of the total three months expenditures ending in September. State & local spending accounted for 23.8%, leaving 1.9% for federally financed projects. The private sector posted 6.7% and 3.7% growth for 3 and 12 month y/y comparisons resulting in negative 2.9% momentum for the month.
Single family residential construction recorded 11.0% growth on a three month basis, much stronger than the 7.5%, 12 month y/y score. A momentum score of 3.5% indicates solid future potential. Nationally there is a significant undersupply of existing homes causing prices rise. A strong job market, low interest rates and pent-up demand from first time buyers is driving demand.
State and local total construction contracted further this month, off 3.1% on a rolling 12 month basis and down 3.1%, on a three months y/y basis to $85.5B. This growth value been negative for 13 months in a row. Momentum was flat.
The infrastructure project groups recorded negative growth for both 3 and 12 month y/y for all project groups except Conservation. Power (State & Local), for 3 and 12 months y/y respectively was -14.7% and -28.8% and Transportation scored values of -7.0% and -6.2% for 3 and 12 months y/y respectively. Sewage and waste numbers were -5.7% and -13.5%. Water supply recorded values of -3.0% and -5.6%. Conservation posted the only positive number for the group, up 30.4% for 3 months y/y and 2.3% on a 12 month comparison. Three groups recorded positive momentum led by a +28.1% showing for Conservation and a +14.2% for Power.
Non-residential Construction: Table 2 shows the breakdown of non-residential construction (NRC). The overall growth rate was negative 2.1% on a 3 month y/y basis and +3.8% on a 12 month y/y comparison resulting in negative 5.9% momentum.
The growth rate of private NRC was negative 2.5% for the 3 months ending September, less than the rolling 12 month value of 5.2%, leading to negative momentum of -7.8%. This is the first time in 74 months that the 3 month y/y growth rate has been negative.
Figure 1 charts the NSA rolling 12 month expenditure history from 2009 to present. Expenditures (black line) are read on the left Y axis in constant 2009 dollars. The year on year change, (green bars) are read off the right Y axis. Total non-residential expenditures was recently at its highest point since our data began. It has now started to reverse direction. This may mean that we have reached the peak of this construction cycle or it may be a temporary lull. It will take several more months of data to establish which.
Overall the construction market continues to perform well exhibiting continuing y/y growth from the private sector and an ongoing slowing growth from the public sector.
Looking at the project categories within non-residential buildings, some are exhibiting strong growth while others are declining. Commercial, apartments (>4 stories), Recreation and Lodging construction were the only segments to post growth on both 3 and 12 month rolling total y/y metrics. Commercial construction was up 15.8% y/y growth 3 months y/y and +18.0%, 12 months’ y/y. Values of +7.3% and +9.5% for 3 and 12 month y/y growth were posted for Recreation projects. Multi-story residential scored respectable growth on an annual basis at +6.8% but slowed dramatically to +0.7% when observed on a 3 month y/y metric. Lodging also recorded a strong 12 month y/y number, (9.2%) but softened quite a bit on a 3 y/y comparison, (0.3%).
Sectors that are recording contracting expenditures on both rolling 3 and 12 month y/y comparisons, include: manufacturing buildings, transport terminals, healthcare, and religious structures. Manufacturing buildings recorded the weakest performance, down 21.7% and 11.3% for 3 and 12 month y/y respectfully. Transport terminals, -0.4%, 3 months y/y and -2.6%, 12 months y/y. Healthcare -5.4%, 3 months y/y and -3.6%, 12 months y/y. Public safety, +2.4%, 3 months y/y and -1.8%, 12 months y/y. Religious structures, -15.4%, 3 months y/y and -12.5%, 12 months y/y.
At Gerdau we monitor the CPIP numbers every month to keep you, our customers informed on the health of the US construction market. The present market continues to record solid gains in the private sector, while the public sector continues to underperform.