Construction Starts Stumble in First Month of New Year

02/25/2014 by Alex Carrick

Reed Construction Data (RCD) announced today that the value of January construction starts, excluding residential contracts, fell 15.3% after declining in December as well, -13.3%. This year’s kick-off dollar volume, $18.6 billion, was the lowest since February 2013’s $16.4 billion.

In the five years prior to the latest reading, the average January versus December percentage change was -2.0%, ranging from +17.0% in 2010 to -11.3% in 2013.

Since the starts data are not seasonally adjusted (NSA), caution should be used in analyzing monthly movements. Year-over-year comparisons remove much of the seasonal effect. Starts this January were down 6.4% versus the opening month of last year.

The value of construction starts1 each month is summarized from RCD’s database of all active construction projects in the U.S., excluding residential work. Missing project values are estimated with RSMeans building cost models.

Value of United States Construction Starts January 2014 — Year to Date (Reed Construction Data)
	January 2014 ($ millions)	% Change (Jan 204 vs Jan 2013)	% Change (Jan 2014 vs Dec 2013)
Hotel/Motel	441	-28.60%	-30.40%
Retail	1,153	-65.10%	9.60%
Parking Garage	98	-9.10%	-36.00%
Amusement	516	71.40%	51.60%
Private Office	1,624	184.10%	11.20%
Government Office	856	62.30%	34.70%
Laboratory	162	1377.10%	59.50%
Warehouse	435	104.30%	-9.70%
Miscellaneous Commercial	482	-62.20%	-39.90%
COMMERCIAL	5,767	-16.80%	1.90%
INDUSTRIAL (Manufacturing)	309	-41.90%	-72.70%
Religious	87	-37.10%	-34.00%
Hospital/Clinic	1,587	238.70%	54.70%
Nursing/Assisted Living	240	-19.50%	-49.00%
Library/Museum	55	-60.30%	-76.50%
Police/Courthouse/Prison	150	-32.60%	-41.90%
Military	136	-43.40%	-43.20%
School/College	2,711	-29.00%	-22.10%
Miscellaneous Government	300	91.00%	-16.10%
INSTITUTIONAL	5,267	-4.00%	-15.10%
Miscellaneous Non-residential	230	14.20%	-12.80%
NON-RESIDENTIAL BUILDING	11,573	-12.00%	-12.70%
Airport	154	152.10%	110.50%
Road/Highway	2,950	-3.30%	-9.60%
Bridge	854	9.10%	-19.60%
Dam/Marine	268	5.30%	-55.30%
Water/Sewage	1,570	-3.20%	-17.30%
Miscellaneous Civil	1,254	27.40%	-31.80%
HEAVY ENGINEERING	7,051	4.30%	-19.30%
TOTAL NON-RESIDENTIAL	$18,623	-6.40%	-15.30%
The table is based on not seasonally adjusted (NSA) data. Source: Reed Construction Data (RCD). Table: Reed Research Group and Reed Construction Data – CanaData.

Difficult winter weather so far this year has held back starts in many regions, especially in middle and eastern-America. Also, many of the latest statistics on the U.S. economy — including housing starts — have suffered some setbacks. Recent month-over-month total employment gains have been less than hoped for, although the number of on-site construction workers in January jumped by 48,000. The jobless rate in the sector, however, remains uncomfortably high, 12.3%.

Among the four major type-of-structure categories, commercial starts performed best month to month (+1.9%) in January. The two largest sub-categories within commercial both recorded increases in the latest month versus December of last year, with retail +9.6% and private office buildings +11.2%. Compared with January of 2013, the percentage changes aren’t as favorable, except for private office buildings, +184.1% or nearly three times as great. Retail starts in January 2014 over January 2013 were -65.1% and the total commercial grouping was -16.8%.

Manufacturing starts this January were -72.7% versus the final month of 2013 and -41.9% when compared with January of last year. In dollar volume, December was the strongest month last year for this construction category, with October a close runner-up. The other 10 months of 2013 averaged about the same as January of this year.

Institutional starts, which were -15.1% month to month in January, were pulled down by their largest sub-category (i.e., more than 50% of the total), schools and colleges at -22.1%. Hospital work is the second most important component of institutional work and it was a robust +54.7%. More impressively, year-over-year hospital starts were +238.7%. That helped to counter-balance a 29.0% year-over-year decline in school work, so that the year-over-year decline in total institutional was a relatively modest -4.0%.

Heavy engineering project starts in January were 19.3% down compared with December, but 4.3% ahead of January of last year. The most significant drops month over month occurred in water and sewage work, -17.3%, and roads and highways, -9.6%. There was also a 19.6% drop in the month-to-month dollar volume of bridge starts. The total “civil” category fared better year over year, +4.3%, with bridges +9.1% and the road/highway and water/ sewage sub-categories both down only modestly, -3.3% and -3.2% respectively.

In the last several months, two swift agreements reached by the Democrats and Republicans to deal with the deficit and debt problems have been an unexpected — i.e., after the standoff of last fall — and welcome surprise. These help establish a more reliable and stable economic environment in which business leaders can make appropriate investment decisions. They also set the public sector’s financial framework for important upcoming infrastructure projects.

1 A start is determined by taking the announced bid date and adding 30 days. It is then assumed the project will actually break ground within 30-60 days of the start date. Reed continues to follow the project via our network of researchers so if the project is abandoned or re-bid, then the start data are subsequently updated to reflect the new information.

Source: Reed Construction Data