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Notes on March 2018 Construction Spending

5-2-18

Construction Spending March down 1.7% from Feb, BUT, Feb was revised UP by 2.6%, 2nd largest mo/mo revision in 7 years.

Today is 2nd upward revision to January construction spending, now up 2.5% from original issue. Jan/Feb 2018 up 6% from Jan/Feb 2017

Should you be worried that construction spending for March was reported down 1.7% from Feb. No! Not unusual for 1st report of monthly construction spending to come in down. It’s normal. Current unadjusted monthly value is ALWAYS being compared to a (most always upwardly) revised value.

Last 5 years the 1st release of spending was reported down 25 times from the previous month. 20 of those were later revised up.  The 1st report of spending has been revised up 55 times in the last 60 months.

Residential construction spending Q1 2018 UP 5% from Q4 2017, up 8% from Q1 2017

Looks to me like the rapid growth in MF occurred in 2014-2016, Still had minor growth in early 2017 but rate of growth had slowed dramatically. Essentially, no growth at all since Q2 2017. MF trend seems flat to down. I see all RSDN trend slowing, potentially down in 2019.

Keep in mind, Rsdn inflation has averaged over 5.5%/yr for last 5 years. If residential spending is not increasing greater than 5.5%/yr, then real volume is declining.

Nonresidential Bldgs construction spending Q1 2018 up 5%+ over Q1 2017.

Why is Manufacturing construction spending down YTD vs Q1 2017, when I’m predicting 14% gain this year? Because Q1’17 was the high for 2017 and dropped 13% by year end, whereas Q1 2018 is the low for the year, expecting 16% growth by year end.

Spend YTD Mnfg 5-3-18

Public Safety, +19% ytd is the biggest percent gainer in Nonresidential Bldgs spending, but has a very small share of total $ spending. The biggest $ gainers are Commercial, +$1.8bil, Lodging and Healthcare both at +$0.8bil.

Infrastructure construction spending Q1 2018 up only 1.5% from Q1 2017, held down by power -6% and highway -3%, two largest markets. Transportation up 21%.

Environmental Public Works, comprised of the following, is up 12 % from Q1’17. Conservation up 25%. Water Supply up 10%. Sewage Waste Disposal up 8%.

Although I’m forecasting only 4% growth in the Power market, it is down YTD vs Q1 2017 for the same reason as Manufacturing. Q1’17 was the high for 2017 and dropped 6% by Q4 2017, whereas Q1 2018 is the low for the year, expecting 11% growth by year end.

Spend YTD Power 5-3-18

Transportation construction spending posted the largest $ growth in Q1 2018 of any market, up nearly $2bil over Q1 2017. Year-to-date, Trans is up 21% over 2017. In my 2018 Forecast, I forecast Transportation to gain 35% in 2018 over 2017. YTD will increase over next 6 months. The next two quarters in 2018 will show continuous growth vs 2017 in which April through Sept posted no growth over Q1’17.

Spend Transport 5-3-18

I’ve been forecasting 25% to 35% growth in Transportation spending since November. Other analysts projections range between -1% to +7%, $8bil lower than my forecast. 2017 new starts more than doubled from 2016, due to several very large terminal and rail projects. Also 2016 is still contributing an out-sized share of work to 2018 spending. The elevated rate of growth in Transportation spending will extend into 2019.

 

Public Construction Spending in Q1 2018 is up 6.7% from Q1 2017. Single largest $ gain is Transportation, up $0.9bil. As a group, Environmental Public Works is up 12%, up $1bil. Public Office and Educational are each up $0.5bil. This is the best growth in public spending since 2015vs2014 and is better than any other quarter back to 2008.

 

2018 Construction Spending Forecast – Mar 2018

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