The Construction Business Sucks Right Now

[Perchoutofwater]

Nonresidential Construction Spending Plummets 6.9 Percent in January

"In the final analysis, the January construction spending data supports the notion that the recovery in nonresidential construction has not yet begun." —ABC Chief Economist Anirban Basu.

In a further sign that the nation’s builders continue to struggle after the recession, private nonresidential construction spending fell 6.9 percent in January, according to the March 1 report by the U.S. Commerce Department. Year-over-year, private nonresidential construction spending is down 13.2 percent. Total nonresidential construction spending – which includes both privately and publicly financed construction – was down 3.3 percent in January and 5.3 percent lower from the same time last year, and now stands at $536.7 billion.

(See Analysis below)

 

Those subsectors posting the largest monthly percentage losses in spending include lodging, down 20.2 percent; power, down 10.9 percent; health care, down 6.4 percent; amusement and recreation, down 6.2 percent; and office, down 5.2 percent. The subsectors with the largest losses year-over-year continue to be lodging, down 44.9 percent; manufacturing, down 25.5 percent; and office construction, down 22.6 percent.

Five of the sixteen nonresidential construction sectors still managed to post increases for the month including conservation and development, up 5.5 percent; public safety, up 4.4 percent; water supply construction, up 2.3 percent; and transportation, up 1.2 percent. Six subsectors were higher from the same time last year including water supply, up 18 percent; conservation and development, up 14.6 percent; highway and street, up 11.3 percent; transportation, up 8.2 percent; and power, up 5.2 percent.

Public nonresidential construction spending was flat for the month and up 2.5 percent from January 2010. Residential construction spending surged 5.1 percent for the month, but was still down 7 percent from the same time last year. Total construction spending – which includes both nonresidential and residential – was down 0.7 percent from December 2010 and 5.9 percent lower from one year ago.

Analysis

“One could simply disregard January’s construction performance as a reflection of meteorological rather than economic phenomena,” said Associated Builders and Contractors Chief Economist Anirban Basu. “It was cold and snowy, and it is likely that weather played a role in suppressing overall activity. Further, the construction employment data from January, released early last month, also appear to support this notion.

“While the nation’s bad weather explains part of the situation, it’s clear that economics was also at play,” said Basu. “Remarkably, total construction spending in America would have expanded in January relative to December had it not been for a sharp decline in energy-related construction. Spending on construction related to this sector fell from $94 billion on a seasonally adjusted annualized basis to $84 billion. That more than offset the gain of $4 billion in spending in the overall U.S. construction sector.

“However, the gain in non-energy-related construction spending was largely driven by residential construction, which experienced an increase in construction spending of more than $12 billion in January on a monthly basis,” Basu said. “Nonresidential construction spending remained negative on a monthly basis even when one excludes the performance of the energy subsector.

“In the final analysis, the January construction spending data supports the notion that the recovery in nonresidential construction has not yet begun,” said Basu. “It is possible that weather has merely delayed this process and that broader economic fundamentals will eventually shine through in the spring. Unfortunately, it is also possible that the economic fundamentals do not yet support recovery in the nation’s construction industry, and that the cold temperatures of January were merely incidental.”

 

Not fun at all.

[HowboutthemCowboys]

Booming here

[Perchoutofwater]

Booming here

 

Where is here, and what is being built?

[bpwallace49]

I see a LOT of unfinished McMansions in my area in foreclosure going for peanuts. Residential has fallen off a cliff in Illinois

[Big John]

Where is here,

Central PA.

[Perchoutofwater]

There have been a ton of jobs lost in construction over the last two years. According then BLS Texas had the following number of construction workers per year:

 

2008 - 8,078,900

2009 - 7,146,000

2010 - 6,770,700

 

So between 2008 and now there are 16.2% fewer people working on construction projects in Texas. I bet that number is still overly optimistic, as a number of companies are probably still paying key personnel to either sit at home, or do repairs to their buildings which they are grossly over qualified to do. I know I've currently got three superintendents working as carpenters repairing our building.

 

ETA: The BLS lumps logging and mining in with construction.

Edited March 1, 2011 by Perchoutofwater

[i_am_the_swammi]

There have been a ton of jobs lost in construction over the last two years. According then BLS Texas had the following number of construction workers per year:

 

2008 - 8,078,900

2009 - 7,146,000

2010 - 6,770,700

 

So between 2008 and now there are 16.2% fewer people working on construction projects in Texas. I bet that number is still overly optimistic, as a number of companies are probably still paying key personnel to either sit at home, or do repairs to their buildings which they are grossly over qualified to do. I know I've currently got three superintendents working as carpenters repairing our building.

 

meanwhile, Texas reported a decrease of 1,308,200 illegal aliens between 2008 ans 2010.

[Perchoutofwater]

meanwhile, Texas reported a decrease of 1,308,200 illegal aliens between 2008 ans 2010.

 

Well, when you figure the official population of Texas is somewhere around 24 Million, and 8 Million people were working in construction then you have to think that either there were a bunch of damned carpetbaggers down here or a bunch of Man-wells. If I had to guess probably a bunch of both.

[whomper]

Well, when you figure the official population of Texas is somewhere around 24 Million, and 8 Million people were working in construction then you have to think that either there were a bunch of damned carpetbaggers down here or a bunch of Man-wells. If I had to guess probably a bunch of both.

 

 

[Perchoutofwater]

Construction spending drops 0.7 percent in January

 

By MARTIN CRUTSINGER

 

The Associated Press

 

Updated: 9:25 a.m. Tuesday, March 1, 2011

 

WASHINGTON — Builders began work on fewer offices, shopping centers and other commercial projects in January, pushing construction spending down to near a decade low.

 

Builders trimmed their activity 0.7 percent in January following a revised 1.6 percent decline in December, the Commerce Department reported Tuesday.

 

The consecutive declines pushed total spending down to a seasonally adjusted annual rate of $791.8 billion in January, close to the decade low of $791.5 billion hit in August.

 

The current pace of construction activity is just about half of the $1.5 trillion level that economists believe would signal a healthy construction sector. They think it could be another four years before construction recovers to that level.

Builders have struggled with falling demand since the housing bubble burst, helping to push the country into the deep 2007-2009 recession. The recession lowered overall economic activity and that depressed demand for office buildings, hotels and shopping centers. In addition, banks tightened lending standards, making it harder for builders to get financing for projects.

 

For January, total private construction fell 1.2 percent to a seasonally adjusted rate of $490 billion.

 

Housing activity rose 5.3 percent to a rate of $245.6 billion but private nonresidential construction dropped 6.9 percent to a rate of $244.4 billion. The weakness in this area was led by an 18.2 percent drop in construction of hotels and motels. Spending on office buildings fell by 6 percent and the category that includes shopping centers was down 1.4 percent.

 

Government construction edged up 0.1 percent to an annual rate of $301.8 billion in January, supported by a 9.1 percent rise in federal projects, which climbed to an annual rate of $31.5 billion.

 

Construction by state and local governments fell 0.9 percent to an annual rate of $270.4 billion. Building at the state and local level is being constrained by efforts to get control of large budget deficits.

 

Really not liking what I'm seeing.

[Yukon Cornelius]

starting to pick up up here. union buddies say this summer many will be called back to work . many already have

[millerx]

starting to pick up up here. union buddies say this summer many will be called back to work . many already have

so those unwanted toys have a union? no wonder nobody wanted them!!

[wiegie]

This is actually one of the reasons that I think that the government should continue to have stimulus projects.

 

It makes absolutely no sense at all that Perch's perfectly good workers and his perfectly good capital and sitting around doing nothing right now. If the market can't figure out a way to put them to work productively, then the government should. I am guessing that there are a fair number of possible investment projects that the government could hire Perch's firm to work on right now that will improve the quality of life for Americans in the future.

[TimC]

meanwhile, Texas reported a decrease of 1,308,200 illegal aliens between 2008 ans 2010.

 

When construction starts to pick back up, I hear Jesus will make a second coming. And by Jesus, I mean Hay-Zeus, of course.

[wiegie]

When construction starts to pick back up, I hear Jesus will make a second coming. And by Jesus, I mean Hay-Zeus, of course.

not bad

[SEC=UGA]

We're definitely struggling, but have found some pretty positive signs in the NE and Mid-Atlantic. We have already signed as much $ volume in contracts for projects starting in the first 5 months of this year than we did all of last year. We are on course to break even land this year.

 

We are seeing most of the activity from REITS that we do work for. Mom and pop still can't get financing terms that are agreeable and in many cases can't secure financing at all.

 

The SBA has started giving loans out for the Self Storage industry, but in most cases it is for additions to existing facilities, new facilities aren't typically able to get the financing. We are seeing some small expansion projects due to this.

 

At some point in the near future something has to give. Developers are getting killed on their carrying costs for the land on many of these projects and are starting to realize that it might be beneficial to make the project go even if it requires them putting in more equity up front, they may decide that a 4% to 8% return in the first few years is better than negative cash flowing or giving the land back.

 

A Huge problem that we are currently facing is that steel prices have shot up about 35% since December of last year. Everything we quoted at the end of the year, therefore , has seen an overall price increase of roughly 14%, most developers don't have this much reserve built into their projects for a single line item when being approved by the lender. Not only is our portion of the project increasing, but so are other aspects, electrical (copper is through the roof), fire suppression (steel piping has increased by about 40%), concrete, etc... are all going up in price and may kill a number of projects. The one bright side, for our specialty, is that two new steel mills are coming on line that should help to limit the price increase on steel from June forward. However, some of the products from which they fabricate steel are becoming a bit more scarce. For instance, the floods in Australia severely dampened the production of coke and iron, tin and iron coming from India is being produced at about 60% of the rate of last year and the SE Asian economies are starting to roll again leading to smaller supplies of steel for the US.

 

We'll see where all this goes. I do know one thing, if by July it looks like we will lose 7 figures again this year, it may be time to shut it down and go on vacation til things pick back up.

[Ursa Majoris]

This is actually one of the reasons that I think that the government should continue to have stimulus projects.

 

It makes absolutely no sense at all that Perch's perfectly good workers and his perfectly good capital and sitting around doing nothing right now. If the market can't figure out a way to put them to work productively, then the government should. I am guessing that there are a fair number of possible investment projects that the government could hire Perch's firm to work on right now that will improve the quality of life for Americans in the future.

I agree with this but the irony, the irony if it turned out to be so.

[Square]

A Huge problem that we are currently facing is that steel prices have shot up about 35% since December of last year. Everything we quoted at the end of the year, therefore , has seen an overall price increase of roughly 14%, most developers don't have this much reserve built into their projects for a single line item when being approved by the lender. Not only is our portion of the project increasing, but so are other aspects, electrical (copper is through the roof),

Our main factory just had a price increase on the 1st and is expecting another one in August. Sucks for bid work.

[SEC=UGA]

Our main factory just had a price increase on the 1st and is expecting another one in August. Sucks for bid work.

 

My head estimator has lost weight and hair trying to project price increases and keep prices competitive. Only way to go is to guarantee the price for 30 days. Our standard boiler plate... "Due to increasing volatility in the steel market this price can only be guaranteed for thirty days from the issuance of this bid. Future steel price increases will be documented and passed on to customer at cost."

[TimC]

My head estimator has lost weight and hair trying to project price increases and keep prices competitive. Only way to go is to guarantee the price for 30 days. Our standard boiler plate... "Due to the fact we sold our soul to China for cheap steel for a few years and drove out all American competition, now we're stuck with inferior steel and China controls the prices beyond our control."

[HowboutthemCowboys]

Where is here, and what is being built?

 

 

Central PA.

Yep.

 

Natural gas. Alot of big companies from Texas and Louisiana are piling into this area right now. Haliburton, CUDD, Chief.. They're hitting natural gas EVERYWHERE starting right about where I am and heading north to the NY line. The gas companies are buying every building they can find that has a roof on it and building on just about every piece of vacant ground around. Most of the buildings they're buying don't have a big enough electric service to handle their machinery, so we're upgrading alot of them.

 

The biggest hospital in the area just added a new tower; I believe 6 stories..

[nuke'em ttg]

i started when it sucked,paid my bills for 25 years,got out and it still sucks...Dad said i was gonna have a hard life cause his Dad was a carpenter and saw what went on...Got my name and some nice homes i'm leaving behind...guess that's why i was here.