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Spending Summary Construction Forecast Fall 2017

12-2-17

Summary

Total construction spending in 2017 will reach $1,236 billion, an increase of 4.2% over 2016. Residential spending is above 10% growth for the 5th consecutive year.

Year-to-date construction spending growth through October is 4.1%.

Residential leads construction spending growth in 2017 for the seventh consecutive year, up 10.6%. My Nonresidential Buildings forecast has been lowered since July but finishes the year up 2.8%. Only Non-building Infrastructure will not improve over 2016, down 3.7% for the year. However, Non-building Infrastructure has been at an all-time high for the previous two years.

Spend ALL 2011-2018 12-3-17

This forecast is down slightly since July due to reductions in both nonresidential buildings and non-building infrastructure. Educational, Office, Power and Highway, four of the five largest markets which together make up half of all nonresidential spending, were all lowered.  Some of these markets are prone to very large post-annual upward revisions and that has the potential to add to 2017 spending when those revisions are released in July 2018. In the July 2017 revisions, Power spending for 2016 was revised up by 10%.

History shows spending has been revised up 51 times in the last 55 months. I wouldn’t be surprised to see future revisions smooth out spending in unusually low periods (April and July) and increase total 2017 spending above this forecast. I suspect revisions in July 2018 may show 2017 spending as high as $1,250 billion. The average post-annual total spending revision for the last four years is +3%, although the total revision to 2016 was only 2.2%.

None of the spending detailed in this analysis includes any projections of potential work from future infrastructure stimulus.

Total construction spending in 2018 is currently forecast to reach $1,334 billion, an increase of 8.0% over 2017. For the first time since pre-recession, Non-building Infrastructure will lead all spending with potential to increase by 10% growth over 2017.

Non-building Infrastructure is forecast to lead 2018 spending with an increase of 10.2% due to very large projects in Power and Transportation. Nonresidential Buildings growth is strong for 2018, forecast up 9.3%. Residential spending in 2018 slows to only 5.7% growth after six years averaging 13%/year.

Total spending will reach a new high in 2018 for the third consecutive year. However, in constant $ adjusted for inflation, spending is just back to the level of 2008. The all-time constant $ high was reached in 2005. Adjusted for inflation, 2018 will still be 12% below that level. At current rates of growth, we would not eclipse the previous high before 2022.

Spend Summary 2017-2018 Oct 2017 12-2-17

Growth of 8% in 2018 or $100 billion in construction spending demands a few words on jobs growth. Construction requires about 5000 workers for every added $1 billion in construction volume. Construction jobs have never increased by 500,000 in one year. However, $100 billion in added spending is not the same as $100 billion in volume, and jobs grow based on volume. Although spending will increase 8%, construction inflation has been hovering near 4.5% to 5% for the last five years. Real volume growth in 2018 after inflation is expected to be just over 3% or $40 billion. That would mean the need, if there are no changes in productivity, is to add about 200,000 additional workers in 2018, a rate of jobs growth that is well within reach since that is below the average jobs growth for the last seven years.

Residential Buildings Spending

Total Residential spending in 2017 will finish at $523 billion, up 10.6% from 2016. Residential spending is above 10% growth for the 5th consecutive year.

Residential spending was expected to dip between May and October due to a low volume of work contributed from starts cash flows. The actual data shows, after reaching a seasonally adjusted annual rate (saar) of $536 billion in March, the high for the year, spending dropped 3% to 4% to as low as $515 billion saar three times and has averaged only $520 billion saar from April through October. New starts in Q1’17 reached an 11-year high, so I expect the rate of spending to increase at year end. Residential work will close out the year with 10.6% growth, the 5th consecutive year over 10%. Average growth the last six years is 13%/year.

Residential spending is 50% single family, 13% multi-family and 37% improvements.

Residential Improvements has posted 18% growth year-to-date. Single Family spending is up 9% while multi-family is up only 4%. That is compared to 2016 when improvements for the year finished up 10%, SF up 4% and MF up 5%. Census does not include flood damage repairs in improvements but does include full flood damaged structure replacements in improvements.

Total residential spending in 2018 slows to a forecast of $553 billion, only 5.7% growth over 2017.

Due to the shorter duration of projects, nearly 70% of residential spending within the year is generated from new starts. Unlike Nonresidential, backlog does not contribute nearly as much to Residential spending within the year. New Residential starts in Q1’17 reached an 11-year high. Residential starts are at a post-recession high.

Residential spending will reach a 12-year high in 2018. Adjusted for inflation, all years from 1996 through 2007 were higher. Inflation adjusted spending is still 30% below the all-time high reached in 2005.

Spend Sector 2015-2018 12-3-17 

Nonresidential Buildings Spending

Total Nonresidential Buildings spending in 2017 will come in at $420 billion, up only 2.8% from 2016.

Commercial/Retail is expected to finish the year with +13% growth and Lodging +9%. An unexplained surprise was Office, which by early indicators was predicted to show large gains in spending. Two independent sources reported new office starts in 2016 up 25% to 30%. Starting backlog coming into 2017 was near or at an all-time high. Spending was forecast to jumped at least 20% in 2017. Instead, spending posted declines from May to September and is now forecast to finish with only a 4% gain. This market accounts for the single largest miss in my forecast posted in Feb 2017.

The only major nonresidential building in decline this year is Manufacturing. Manufacturing spending was expected to fall in 2017 after peaking in 2015 from massive growth in new starts in 2014. Spending stayed close to that level in 2016. Based on cash flows from starts, spending was expected to decline in 14 of the last 18 months. It declined in 11 of those months. We are at the point of turn-around with only one monthly decline predicted in the next three months and no spending declines expected next year. For 2017, Manufacturing new starts are up 35%.

Spend Nonres Bldgs 2017-2018 Oct 2017 12-2-17

Nonresidential Buildings starts in the six months from Aug 2016 to Jan 2017 posted the (then) highest amount of new starts since Jan-Jun 2008, also the year Nonresidential Buildings spending peaked. Then new starts in the six months Apr-Sep 2017 just surpassed both those previous peak highs.

Nonresidential Buildings 2018 starting backlog is 50% higher than at the start of 2014, the beginning of the current growth cycle. Starting backlog has increased for five years at an average 10%/year. Spending from starting backlog, up 10% in 2018, increased for five years at an average 9%/year.

Total nonresidential buildings spending in 2018 is forecast to reach $458 billion, an increase of 9.3% over 2017. Office, educational and manufacturing make up 70% of the growth.

Nonresidential Buildings will reach a new high for spending in 2018, surpassing the previous 2008 high. However, adjusted for inflation, spending is 18% below the all-time high reached in 2000.

Non-building Infrastructure Spending

Total non-building infrastructure spending in 2017 drops to $293 billion, down 3.7% from 2016.

Non-building Infrastructure spending, always the most volatile sector, dropped to yearly lows from June through September. Infrastructure construction spending in August dropped to the lowest since November 2014. However, this was predicted. Cash flow models of Infrastructure starts from the last several years show current dips in monthly spending are being caused by uneven project closeouts from projects that started several years ago.

Current backlog is at an all-time high and spending will follow the expected increased cash flows from the elevated backlog. Environmental Public Works (Sewage/Waste disposal down 16%, Water Supply down 9% and Conservation/Dams & Rivers down 7%) posted the largest declines in 2017 and accentuated the declines in the infrastructure sector. The sector is expected to increase slightly in the last quarter 2017. In recent months there are already substantial gains being posted in Conservation and Transportation.

No future growth is included from infrastructure stimulus and yet 2018 is projected to increase by 10%.

Spend Infra Jan15 to Jan19 12-2-17

Total non-building infrastructure spending in 2018 is forecast to reach $324 billion, an increase of 10.5% over 2017. My forecast for 2018 is predicting every infrastructure market will post gains, but it is the Power and Transportation markets that account for almost all the growth in 2018. Transportation new starts in 2017 grew 120% due to massive new air terminal and rail projects. Spending growth in the Power market is not quite so apparent. Combined Power new starts are down for both 2016 and 2017, but the spending gains are coming from projects that started in 2015, a year in which starts were up over 120%.

Non-building Infrastructure will reach a new high for spending in 2018. This sector had posted a new high in 2015 and nearly equaled that in 2016. Adjusted for inflation, spending in 2018 will be nearly equal to the all-time highs reached in 2015 and 2016.

Spend Nonbldg Infra 2017-2018 Oct 2017 12-2-17

Public Spending

Total public spending for 2017 remains flat at $287 billion with most major public markets down for the year.

At midyear, I expected Educational and Highway to support a Public spending increase in 2017. Those gains did not materialize. A decline in Highway spending offset small gains in Educational.  By far the largest Public spending decline is in Sewer and Waste Disposal, down 16%.

Public spending hit the low for the year in July. It increased for the last three months, most recently by an 11% increase in Public Educational spending in October.  We are now near the high for the year and can expect to see another six months of growth before spending levels off in mid-2018.

Spend Public Only 2015-2018 12-2-17

When you see graphics that present Residential, Nonresidential and Public spending all on the same plot, they are not additive. Only Residential and Nonresidential can be added to reach total spending. Public is a subset of Nonresidential, composed partly of Nonresidential Buildings (~40%) and partly Non-building Infrastructure (~60%), with a slight amount of residential.

The two largest markets contributing to public spending are Highway/Bridge, 32% of total Public spending, and Educational, 25% of Public spending. The third largest market, Transportation, is only about 10% of Public spending.  Environmental Public Works combined makes up almost 15% of public spending, but that consists of three markets, Sewage/Waste Water, which accounts for 8%, Water Supply and Conservation. Office, Healthcare, Public Safety and Amusement/Recreation each account for about 3%.

All of Highway/Bridge is Public spending. Only 80% of Educational spending is Public and only 70% of Transportation is Public. Environmental Public Works markets are 99% Public.

Spend Public-Private 2017-2018 Oct 2017 12-2-17

Total Public spending in 2018 is forecast to reach $305 billion, an increase of 6.3% over 2017. Public spending in 2018 will reach the highest year over year growth since 2008.

Educational and Transportation will contribute equally and together account for almost 60% of the Public spending growth in 2018. Transportation new starts in 2017 grew 120% due to massive new air terminal and rail projects. Educational new starts total for the last three months posted the highest quarter in at least seven years. The 2nd highest quarter was also within the last 12 months, so still contributes fully to 2018 spending. 2018 signifies a turn-round in Public spending which has not posted significant growth since the recession.

See this companion post for  Starts Trends Construction Forecast Fall 2017  11-8-17

After New Starts, dollars are tracked in Backlog, Backlog Construction Forecast Fall 2017  11-10-17

For more on Jobs and Workload see Construction Jobs / Workload Balance 11-7-17 

For effects of inflation see Constant Dollar Construction Growth 11-2-17

Starts Trends Construction Forecast Fall 2017

11-8-17

It all starts here! Construction Starts Generate Construction Spending.

2017 construction starts through September total $557 billion Year-to-date (YTD), even with 2016. If/when 2017 gets revised as expected it will then show +3% to +4% growth over 2016, but we won’t see that growth in the revision data until next year.

  • Previous year starts always later get revised upwards. Therefore, current year starts ytd growth is always understated.
  • Revisions for the period 2012-2015 averaged +4%.
  • Revisions to 2016 year-to-date through September are +10%.
  • Starts have been increasing at an average rate of 11%/year for the last 5 years.
  • Nonresidential Buildings and Nonbuilding Infrastructure are at or near all-time highs.
  • Residential starts are at a post-recession high.
  • New starts will generate record high 2018 starting backlog for every sector.

Nonresidential Buildings starts, averaged 13%/year growth for the last 4 years, even though there was a 1% decline in 2015. 2017 will post an 8% increase. The 6 months from Aug 2016 to Jan 2017 was the highest period of starts since Jan-Jun 2008, the year nonresidential buildings spending peaked. The 6 months Apr-Sep 2017 just surpassed both those previous peak highs. This will help support increases in nonresidential buildings spending for the next two years.

Infrastructure starts posted a higher value of new construction projects in the 1st 6 months of 2015 than any 6-month period in history. 2016 is down just 2% from the peak 2015 starts and 2016 is the 2nd highest starts on record. Those early 2015 starts will still generate 10% of all spending in 2018. After revisions, 2017 starts may set a new peak high. This would set up infrastructure as the strongest growth sector for the next two years.

Residential starts in 2016 posted the best year since 2005-2006. New starts in 2016 were revised up by 5% to show an increase of 10% growth over 2015. That follows five years of growth averaging 20%/year. Initial values posted for 2017 show starts up by only 3.5%, however, the average revision for the past few years has been +2% to +4%, so 2017 will get revised higher. New starts in Q1 2017 reached an 11 year high.

All construction starts data in this report references Dodge Data & Analytics Starts data.

Starts CF 11-7-17

Nonresidential Buildings

Retail/Commercial starts may finish flat for 2017 but that is compared to peak starts in 2016. Starts for the 12 months Aug 2016 – June 2017 posted 10% growth over the previous 12 months. Commercial starts have been increasing every year since 2010.

Office construction starts have been increasing since 2010 with the strongest growth period of new starts in the 12 months July 2016 – June 2017, the highest 12 months on record, 60% higher than the previous 12 months. That high-volume period of starts is going to elevate spending in both 2018 and 2019 to come in higher than 2017. Office starts averaged year-over-year (YOY) growth of 20%/year for the last five years. Data centers are included in Office.

Educational starts are up 15% in 2017. Starts have averaged YOY growth of 8%/year for the last two years and have had slow but steady growth since 2012. The growth in starts will support growth in spending or the next three years.

Office, Retail and Educational markets comprise 60% of all nonresidential buildings. They are collectively responsible for 70% of the increase in 2017 nonresidential buildings starts.

Healthcare starts have quietly increased to a record high over the last 12 months, up 30% for the 12 months through August vs the previous 12 months.

Lodging starts will be down ~10% in 2017, but from 2013 to 2016 averaged over 25%/year for 4 years.

Manufacturing is the only nonresidential building market that will NOT finish 2017 with new starts totals at or near post-recession highs. Manufacturing reached record high starts in 2014 and record spending in 2015. However, 2017 will post new starts 50% higher than initially predicted by Dodge.

Manufacturing spending was expected to fall in 2017 after peaking in 2015 from massive growth in new starts in 2014. Based on cash flows from starts, spending was expected to decline in 14 of the last 18 months. It did decline in 11 of those months. We are at the point of turn-around with only 1 monthly decline predicted in the next 3 months and no spending declines expected next year.

Non-building Infrastructure

Sewer/Water/Conservation, the three Environmental Public Works markets, posted declines in new project starts in 3 (sewer) or 4 of the last 4 years. Collectively, new starts in 2017 are the lowest in 5 years. Cash flow predicted from starts has been indicating spending declines since Q2-2016. In fact, spending has declined in 12 of the last 18 months. Cash flow still predicts more spending declines over the next 8 months.

Highway/Bridge/Street starts in the 2nd half of 2014 recorded the slowest rate of growth in the last 6 years. Starts that would normally be contributing spending through 2017 and into 2018 contributed a lower than normal volume of spending which will end in 2017. Had it not been for the extremely high volume of starts in the 1st 4 months of 2014, the most ever recorded in 4 consecutive months, 2017 spending would have dropped more than double the 4% spending decline now forecast.

Highway starts in the 1st 6 months of 2015 posted the next highest growth to early 2014. Spending in 2018 will benefit from those projects that started in 2015 but that have unusually long duration. They will contribute a higher rate of spending in 2018 beyond the duration that typical projects would have ended. It is not recent new starts but old backlog that is influencing 2017 and 2018 highway spending.

Transportation Terminal starts in the first three months of 2017 were more than three times higher than any three-month period in the previous five years. While this helped turn 2017 spending positive, 2017 is still affected by uneven starts from two to three years ago holding down gains in the 2nd half. Transportation will show only a 1% gain in 2017 spending but will post double digits gains in 2018. The high volume of 2017 starts has the most effect on 2019 spending. Terminal buildings is reported in Dodge Starts in Other Institutional Bldgs. However Census reports terminal spending in Transportation along with rail and Dock spending. I adjust the starts data in my reports conform to Census organization.

Power market starts peaked in 2015 at an all-time high, up 142% from 2014 and more than the prior two years combined. The Power market was the prime contributor to the abnormally high infrastructure starts in the 1st 6 months in 2015. Power spending was down 6% in 2015 and up only 3% in 2016 because Power starts were also at an all-time high in 2012, just below the 2015 level, and those starts drove 2014 spending to an all-time high, but then spending from those old jobs tapered off in 2015.

Power starts dropped 11% in 2016 and are down slightly in 2017. Recently, there has been an unexpected large volume of power plant and pipeline starts that are driving 2017 power starts to come in about 40% higher than initially expected.

Even though Power starts have been declining since the 2015 high point, Power had several periods with an exceptionally high value of new starts, some of these periods 2x to 3x the normal rate of growth and a year or two longer duration than typical; late 2014, Jan-May 2015, Feb-Jun 2016 and again in Feb-Jul 2017. A large share of the cash flow, or monthly spending, from all those exceptional starts will occur in 2018 and 2019 and will drive spending to 10%+ gains.

Although starts are not tracked for Public vs Private, Highway, Educational, Environmental Public Works and Transportation make up more than 80% of all Public construction. Only Environmental Public Works starts are down. Educational, Transportation and Highway all have a positive outlook in new starts and predicted spending for 2018 which pushes public spending to post-recession highs.

Here’s how to use the Starts data and how it affects spending Construction Starts and Spending Patterns 9-26-17

Also after New Starts, dollars are tracked in Backlog, Backlog Construction Forecast Fall 2017  11-10-17

See the Spending Forecast Spending Summary Construction Forecast Fall 2017

 

Constant Dollar Construction Growth

11-2-17

Construction spending had been chugging along very nicely from 2012 through 2016 with annual growth ranging between +6.5% and +11.0%. The average spending growth for those 5 years is 8.5%/yr. For 2017, spending growth will come in at only just over 5%.

Perhaps what may be more important is the inflation adjusted growth or constant dollar growth. Constant dollar growth measures volume. Volume growth ranged from +3.0% to +8.0% in the 5 years from 2012 through 2016. The average constant$ growth for those 5 years is 5.4%/yr. The rest of the spending growth was inflation dollars. For example: a year in which spending growth is 7% but that has 4% inflation ends up with only 3% constant$ volume growth.

From 2005 peak volume ($1,448 bil in 2017$) to the lows reached in 2011 ($954 bil), constant dollar volume dropped 34%. Since the 2011 low, volume has increased 31%. In rapid growth years volume increases between 6% to 8%/yr. In average or low growth years, constant dollar volume growth ranges closer to 2% to 3%/yr.

Spend current vs constant 2017 11-8-17

2017 will post the highest composite construction inflation in 11 years, 4.5%. Residential inflation has averaged 6%/yr for the last 5 years. With 2017 at 5% construction spending growth, the lowest in six years, and at the highest inflation in years, 2017 volume growth will fall to only +0.6%.

Residential, with nearly 12% spending growth in 2017, still holds onto the best volume growth in 2017 at slightly over 5%. Residential has recorded the highest volume growth in 5 of the last 6 years, the lowest coming in at +5%, averaging 8%/yr for 6 years.

Nonresidential Buildings constant dollars is down slightly for 2017, posting a volume decline of -0.2%. This was predictable since Manufacturing, after recording 90% growth from 2011 to 2015, has worked off a big backlog and dropped 15% (from an all-time high) in the last two years, most of that drop in 2017. For 2017 that drop offset $8 billion of growth from other markets. Nonresidential Buildings volume increased 20% in the previous 3 years.

Non-building Infrastructure volume is down 6% in 2017 after growing only 5% in the previous 2 years. However, the non-building infrastructure sector led all growth in 2014 at +8.5%. It should be noted that 2015 posted the all-time high for Infrastructure spending. The largest declines since then are in Environmental Public Works projects, Sewer/Water/Conservation. All three markets posted declines in new project starts in 3 or 4 of the last 4 years. Spending in 2017 is down 17% from the most recent high in 2015.

Public works spending is responsible for 80% of the dollar decline in non-building infrastructure spending since the high in 2015.

In 2018, Nonresidential Buildings and Non-building Infrastructure lead spending growth.  Residential spending will slow considerably after six years of solid growth. Constant$ volume growth after inflation will climb back to +2.3% with the two nonresidential sectors over 5% and residential dropping to a volume decline.

Spend Sector Constant 2006-2018 11-2-17

 

 

Is Infrastructure Construction Spending Near All-Time Lows?

10-10-17

Is Infrastructure construction spending near all-time lows? This question is raised because I saw comments to this affect recently posted on a major national construction professional organization twitter feed.

First, this raises several other questions:

  • Exactly what construction markets are being referenced as infrastructure?
  • Does this reference include public work only, or both public and private?
  • Are educational and health care being included as infrastructure?
  • Does this reference constant inflation adjusted spending?

The construction markets typically referred to as infrastructure, in order of largest to least volume, include;  Power, Highway, Transportation, Sewage/Waste Water, Communications, Water Supply and Conservation. Sometimes also considered are Educational (3rd after Highway), Healthcare (after Transportation) and Public Safety (2nd smallest).

If only public work is included, everything changes. Most (90%+) of Power spending is private, so it represents less than 3% of public work. The largest contributors in this case are: Highway (32% of public work), Educational (25%), Transportation (11%), Sewage (8%) and Water Supply (4%). No other market is greater than 3% of public work.

And finally, is the reference to current dollars as originally spent within each year, or to constant inflation adjusted dollars, adjusting all historical expenditures to constant 2017 dollars? Any comparison to determine if real growth has occurred should be in constant dollars, in this case all adjusted to 2017.

Typical infrastructure, not including educational, healthcare or public safety, but including all public and private sector work produces this result:

Spend current vs constant INFRA 1993-2018 plot Sep 2017

However, the most likely reference is to typical public infrastructure, not including educational, healthcare or public safety. This scenario includes only the public sector work of typical infrastructure and eliminates private spending. This eliminates 90%+ of all power work and 100% of communications. So, for this scenario I’ve removed all power work and communications work. This is the result:

Spend current vs constant INFRA PUBLIC 1993-2018 plot Sep 2017

In both instances, the lows, whether using current or constant dollars, occurred between 1993 and 2004. The highs are recent, all occurring from 2007 to 2016. 2017 spending dropped somewhat from 2016.

To answer the question, Is Infrastructure construction spending near all-time lows? NO! Infrastructure construction spending is not at or even near all-time lows. In fact, if we extend our timeline back more than three years, it’s not even near recent lows. It is near all-time highs!

Infrastructure construction spending in August dropped to the lowest since November 2014. However, this was not unexpected. Cash flow models of infrastructure starts from the last several years show monthly spending dips and peaks. Current dips in spending are being caused by uneven project closeouts from several years ago. The actual current backlog is at an all-time high and spending will follow the expected cash flow.

Spend Infra Jan15 to Jul18 10-10-17

Infrastructure starting backlog hit a new all-time high in 2017 and will again in 2018.  Public Infrastructure new starts reached all-time highs in 2013 and 2015 and are on track to go higher in 2017.  80% of infrastructure spending within the year comes from backlog at the start of the year and that backlog may be comprised of jobs one, two, three and even four years old.

Infrastructure spending in 2017, although down slightly from the all-time high reached in 2015 and nearly equaled in 2016, will reach a new high in 2018.

(This analysis does not include any spending projections from an infrastructure investment bill).

Highway spending is currently benefiting from projects that started in 2015 but that have unusually high value and long duration. They contribute spending well into 2018 beyond the duration that typical projects have ended.

Transportation Terminal starts in the first three months of 2017 were more than three times higher than any three-month period in the previous five years. However, 2017 spending is still affected by uneven starts from two to three years ago, holding down gains in the 2nd half. Transportation will show only a 1% gain in 2017 but produces double digit gains in 2018.

Infrastructure construction spending is near all-time HIGHS and has been for the last several years. That is not meant to indicate there is no need for infrastructure investment. I think the need is well established. However, I’ve been writing about infrastructure for more than a year, pointing out the level of activity in this sector and the difficulty that will arise when we try to increase work volumes. The approach to adding new work and the discussions surrounding this approach should reference accurate data, and that should include an accurate representation of current workload and future ability to absorb more work.

For much more in-depth related to infrastructure construction see this post Infrastructure Spending & Jobs

 

Construction Spending May 2017 – Behind The Headlines

7-6-17  Construction Spending May 2017 – Behind The Headlines

See Also Construction Spending Summary 7-11-17

Headline – Construction Spending for May came in flat compared to April, up 4.5% vs May 2016.

In this latest May report, April spending was revised up by 1% and May 2016 was revised up by 3%. The average revision since Jan 2016 is 3%/month. May 2017 will be revised in each of the next two reports and again with the May report issued in July 2018.

Current unadjusted construction spending is always being compared to previous months revised spending and growth is almost always being understated. Spending has been revised UP 45 times in the last 4 years.

In 2016, the 1st report indicated monthly spending declined 8 times from the previous month. After revisions, spending declined only twice from the previous month. Most MSM articles declaring construction spending was a miss are revised away in following months. 

Spend Final vs 1st print Jan16 to Mar17 7-3-17

Nonresidential Construction Spending Remains Stagnant in May.

I’ve said this before many times, spending predictions are best tracked based on cash flows from all projects that have started. This is not simply tracking total backlog, nor is it tracking new construction starts. New starts (new backlog) represent only 20% to 25% of total spending within the year. Most spending comes from projects that started in previous years.

Big monthly changes in spending come from unusual fluctuations in starts. Very large projects ending (spending ending), compared to new projects starting, would cause a monthly drop in spending. The reverse would cause an increase. If a record volume month of construction projects that started two or three years ago are now reaching completion, and new starts today are experiencing normal growth not at record levels, then spending will most likely decline temporarily. Most monthly construction spending predictions are predetermined months ago.

Also, Nonresidential construction is comprised of two very different sectors, nonresidential buildings and non-building infrastructure. Infrastructure is quite erratic while buildings spending has been climbing at a steady strong rate for several years. Buildings spending is up 2% from Q2’16 and up 6% YOY. In the 2nd half 2017 YOY spending is expected to reach 8%.

Spend Nonres Bldgs asof May17

Most infrastructure projects that started in 2015 and 2016 are still ongoing so do not effect much change in current monthly spending. It is projects from late 2014/early 2015 that are finishing that are resulting in the largest share of current spending drops. Worthy of note is that non-building infrastructure spending just experienced two years of record highs, so even though spending is down slightly we will still see 2017 finish near record highs.

Spend Infra 2011 to Jan19 7-5-17

 

Construction Companies Continue to Face Labor Shortage Challenges

Construction Spending for the last 24 months increased +13%, but after inflation actual volume during that period increased only +5.5%. Construction output, (jobs x hours worked) for that same period increased +7.6%.

Why is it that jobs output is growing faster than construction volume? Could it be that shortages are localized, not as widespread as thought? Or perhaps it’s that contractors can’t get skilled workers, so they are hiring more workers with less skill? Maybe contractors anticipate growth, so they are hiring more now to prepare for the future? Whatever the case, jobs are growing faster than construction volume and that is not what should be expected in a labor shortage.

Are contractor’s responses to survey questions about filling job positions based on an anticipated need to staff up to meet revenue growth? If so, that is a major miscalculation to determine staffing needs. This is not as far-fetched as you might think. I’ve talked with numerous contractors in the past who were doing this. As I tried to explain in several previous articles, growth in revenue (or construction spending) doesn’t address how much of the growth is due to inflation. Right now, in fact for the last 24 months, the largest portion of spending growth is inflation, not real volume growth.

If you are hiring to match your revenue growth, you are part of the reason jobs are growing faster than volume. INFLATION!

See also Construction Jobs Growing Faster Than Volume

 

Is there a Residential Construction Spending slowdown? If so, how significant?

YTD  Residential Construction spending for the 1st 5 months 2017 is up 12.2% from 1st 5 months 2016. YTD has been above 12% since January.

Average spending for the last three months is up 4.0% from the average in Q4 2016. That’s a ~10% annual rate of growth.  Starts cash flows are indicting flat spending for the next few months but then accelerated spending from late Q3 into the end of the year. Current projected spending for 2017 is $523 billion, +10.5% higher than 2016.

May vs April residential construction spending shows a 0.5% decline. However, April has been revised up once and May has not yet been revised. All months are revised twice after the first release of data. The average revision (to residential data) for the last 16 months is up 4%, the average revision for the last 28 months is up 7%. All revisions for the last 28 months were up. After revisions, there were only two monthly declines in the last 28 months, and both of those were slight.

If new starts collapse to show no gains for the remainder of the year, then based on starts already in backlog and reduced starts for the remainder of the year, spending would be reduced to $513 billion. That’s still 8.5% higher than 2016. Of course, this would be an extremely unlikely scenario. The last time residential construction starts declined for three or more consecutive months was 2010, and the last time there were no gains for six or more months was 2008.

Infrastructure Spending & Jobs

3-22-17

This is a summary of the main points on Infrastructure from several recent articles. Those articles detail current market conditions, growth already in backlog and future growth potential. The articles (linked here) are:

Non-building Infrastructure spending in 2016 will finish at $290 billion, down 1% from 2015. Negative drivers were Transportation, Sewage/Waste Disposal, Communications and Water Supply.  However, Power and Highway/Bridge, 57% of all infrastructure, were both up. Spending based on projected cash flow from Dodge Data Starts predicted this drop.

  • In 2017, Non-building Infrastructure, following two slightly down years, will increase by 4.4% to $304 billion, due to growth in the highway and transportation markets.
  • Headlines point to a 6% decline in new infrastructure starts in 2017
  • Starting backlog for 2017 increased 6% over 2016.
  • The cash flow in 2017 from starting backlog will be up 10%.

Infrastructure currently has the highest amount of work in backlog in history. Starting backlog accounts for 80% of all spending within the year. Even with an anticipated decline in new starts in 2017, starting backlog for 2018 will still be at another new high. Spending from starting backlog is predicted to reach record levels in both 2017 and 2018.

  • Total Construction spending for 2017 is more than $1.200 trillion.
  • Infrastructure, public and private, is $300 billion, only 25% of total construction spending.
  • Public is only 60% of all infrastructure, $180 billion, so 15% of total construction.
  • Public Nonresidential Institutional Buildings referred to as infrastructure (Educ, HlthCr, Safety) adds another $95 billion, 8% of total construction.

The two largest markets contributing to public spending are highway/bridge (32%) and educational (25%), together accounting for 57% of all public spending. The next largest market, transportation, is only about 10% of public spending.

  • Total Construction spending average constant $ growth post-recession is $50 billion/year. It exceeded $75 billion/year only once.
  • Infrastructure, only 25% of total construction spending, increased by more than $25 billion in a single year only once. The average annual growth for the past 20 years (excluding recession yrs) is less than $10 billion/year.
  • Public Infrastructure annual growth averages only $6 billion/year, has never exceeded $16 billion in a single year.
  • Public Institutional Buildings annual growth averages only $6 billion/year, has never reached $20 billion.

Current backlog already accounts for 80% of all spending. Current spending growth from backlog (Public infrastructure + Institutional) is predicted to add $20 billion/year in work over the next two years. This will absorb some current jobs and create 100,000 to 150,000 new heavy engineering and nonresidential jobs.

For every $10 billion a year in added infrastructure spending, that also means adding about 40,000 new construction jobs per year.

Any infrastructure plan added, for the most part, needs to be considered as added on top of the current spending plan, $20bil/yr next two yrs, already at all time highs.

  • Average growth in total construction jobs is about 270,000 jobs per year. The largest growth was 400,000 in 1999.
  • Average post-recession growth in public infrastructure + institutional jobs is about 35,000 jobs per year. The best growth was 50,000 jobs/year.

Current data predicts public institutional and infrastructure spending and jobs growth, already above the long term average, is expected to increase by $20 billion/year for the next several years.

Spend Public Only 2015-2019 3-23-17

Adding $20 billion/year more in spending for an infrastructure expansion plan would push total public work to double record levels. It’s doable, but would be difficult to achieve and is probably not sustainable at that rate. 

One limiting factor will be jobs growth. Also, the supply chain may not have the capacity to increase so rapidly, especially to think the industry could continue to expand at a historical rate of growth for years to come. In years past, expansion like this has led to rampant inflation within the industry.

Adding $100 billion in a single year to public infrastructure and institutional work is unrealistic. That is greater than the maximum level of growth for the entire construction industry. The portion of the industry we are dealing with here is less than 25% of the entire industry.

Adding $100 billion, a one third increase in annual spending for this sector, would require the distribution network surrounding the industry to expand equally as fast. It would need 300,000 to 400,000 new jobs filled in a year, in a sector that has at maximum grown 50,000 jobs in a year. That’s unrealistic.

The public infrastructure subset of the construction industry appears too small to accommodate an increase of $10 billion/year and 40,000 new jobs/year over current growth. When the potential projects pool is expanded to include public institutional buildings, that total pool may then accommodate an increase of $10 to $15 billion/year over normal growth.

Excessively rapid growth will only take volume and jobs away from normal growth, generally leads to rapid inflation and has a devastating effect when a massive program ends and all those jobs disappear.

Construction Backlog March 2017

3-20-17

Starting Backlog is the Estimate-to-Complete (ETC) value of all projects under contract at the beginning of the year. Projects in starting backlog could have started last month or last year or three years ago. The requirement is that those projects have not reached their end-date and some portion of the revenues generated by those projects is still ETC. The sum of all ETC represents current backlog.

A cash flow schedule of all ETC backlog and predicted new starts provides a tool to predict future spending. The $ reported here are the results of a cash flow analysis using Dodge Data & Analytics Construction Starts. Do keep in mind the DDA Starts value represents a survey of about 50% to 60% of the industry. While the percent change of values from year to year is relevant, the $ value does not compare directly to the actual spending $ values.

It is not enough to look at just the change in starts or the change in backlog to get an indication of the strength of the market. While continued growth in backlog is most important, the predicted cash flow from backlog and new starts is necessary for predicting future spending.

Backlog incld Res Starts 2007-2017 3-20-17

Nonresidential Buildings

The last time nonresidential buildings experienced a decline in starting backlog was 2013, Total construction spending on nonresidential buildings in 2013 registered a weak 0.8% gain. Since 2013, nonresidential buildings starting backlog is up 60%, reaching a new all-time high at the beginning of 2017. The previous high in 2009 was $241 billion. In 2016 it was $230 billion. For the start of 2017 it is $248 billion.

Revenues from starting backlog account for 75% of all nonresidential buildings construction spending within the year. If no new work started within the year, by year end there would be only 25% of the total in backlog needed to support the industry.

Not only is starting backlog higher coming into 2017, but also spending from backlog is predicted up by 5% and 2017 new starts are predicted up 8%. New starts are very strong in Office, Lodging, Educational, Healthcare and Amusement/Recreation.

This supports my predictions that 2017 will be another banner year for spending on nonresidential buildings, up a strong 10% from 2016. Similar growth is expected in 2018. This will produce a new high in current dollar spending, but will still be 15% below the constant $ all-time highs.

Backlog Cashflow 2017 ONLY 3-21-17

(edit 3-21-17 updated table)

Non-building Infrastructure

Non-building infrastructure experienced declines in starting backlog in 2012 and 2015. Fortunately, in both of those years, new starts were up. For the last eight years infrastructure starting backlog has been near $200 billion, +/- $10 billion. In 2008, the last pre-recession year, backlog stood at $178 billion. At the beginning of 2017, non-building infrastructure backlog is at an all-time high, $243 billion, up 36% from 2008. In the last two years starting backlog is up 20%.

Revenues from starting backlog account for 80% of all non-building infrastructure construction spending within the year. However, because infrastructure projects are long duration, only about 60% of total backlog gets spent within the year. If no new work started within the year, by year end there would still be 55% of the total in backlog needed to support the industry.

In 2016, although starting backlog was up, new starts were down and spending from backlog was also down. That cemented a decline in spending in 2016. New starts in 2016 declined for power, highway, transportation and public works, but due to long duration projects contributing to strong backlog in these markets, spending will be up in all except public works. New infrastructure starts in 2017 are predicted down 5%, but spending from backlog is predicted to increase by more than 10%, and that more than offsets the decline in new starts. 2017 will post a solid gain of 4% to reach a new high in spending and that is expected to increase again in 2018.

Residential Buildings

Residential new starts hit bottom in 2009 and starting backlog hit bottom in 2010. Residential on average has the shortest duration and new starts has a dramatic impact on the amount of available work. Both new starts and backlog are up about 300% from the lows. New residential starts have increased every year since the 2009 bottom, but are still lower than 2006.

Due to the shorter duration of projects, nearly 70% of residential spending within the year is generated from new starts. Unlike nonresidential, backlog does not contribute nearly as much. If no new work started within the year, within a matter of a few months there would be no backlog ETC left to support the industry.

Coming into 2017, starting backlog is up, and new starts are up and spending from new starts is up. But the rate of growth in new starts and spending from new starts is slowing. This is not unexpected after 4 years (2012-2015) of new starts growth averaging greater than 20%/year. The last two years it’s 12%/yr. This leads to a prediction of future spending increases ranging between 5% to 7% for the next two years. 

See Also Behind The Headlines – Construction Backlog

Calls for Infrastructure Problematic

3-6-17

Few analysts are talking about current forward looking conditions and the problems such a massive infrastructure construction spending program might cause.

Every major construction agency is currently seeing monthly infrastructure construction spending drop and is calling for promptly initiating a $1 trillion infrastructure spending program. Infrastructure spending has been flat to down slightly for the last seven months. But infrastructure spending is notoriously uneven.  I’d like to see increased construction spending as much as the next guy, but there are issues that need to be taken into account. I see problems down the road.

I’ve written about this before here Infrastructure – Ramping Up to Add $1 trillion and here Infrastructure & Public Construction Spending and Conor Sen wrote about it recently in a Bloomberg View article Math Will Kill Trump’s Infrastructure Plan. Some assumptions of increasing infrastructure spending by $100 billion and maintaining that level for the next 10 years are a pipe dream. Only three times in history has the “entire” construction industry ever increased by $100 billion in one year. The infrastructure sector, only 25% of all construction, does not have the capacity to grow by $100 billion in a year.

One of the big issues a massive expansion and abrupt program end causes is the need for a huge growth in the workforce, and that could be difficult particularly at a time when the non-working unemployed pool is near an all-time low. But perhaps  more important, when all that expansion spending comes to an end, there is no long term ongoing backlog for all that labor to go to, so it results in massive job losses. Very large volume new starts and abrupt ending causes devastating disruption in the industry.

Here I will address spending and volume growth.

The infrastructure sector of construction is only 25% of all construction. Growth has exceeded $20 billion/year only three times and average growth (without recessionary declines) is $12.5 billion/year. But most of that was driven by the power market, which is 80% private. Power contributes 1/3rd of all infrastructure spending.  Only 60% of all infrastructure is publicly funded. That public subset of work in the last 25 years has grown by $20 billion/year only once and with all the negative recessionary years eliminated growth would average less than $10 billion/year.

To repeat, because this provides a concept of the capacity of the industry, the entire infrastructure sector has an average growth rate of $12.5 billion/year and the public infrastructure sector less than $10 billion/year. And that’s taking out all the down years. It’s worth a note here that although I have conveniently removed down years from the data to get an average positive-year growth rates, infrastructure spending has never grown continuously for more than five consecutive years without experiencing a down year. The last 5 years 2012-2016 shows 3 years up 20%, then 2015 and 2016 were both down 1% to 1.5%. At the end of 2016, down 2.5% from the high in 2014, spending is still near all-time highs. In constant 2016$, The high was Q1’16 at $300 billion. The average lately is $280 billion, but expect to be back over $300 billion by Jan 18.

Infrastructure currently has the highest amount of work in backlog in history. Current backlog already accounts for 80% of all spending in 2017 and 60% of spending in 2018. Even with an anticipated decline in new starts in 2017, starting backlog for 2018 will still be at another new high. Spending from starting backlog is predicted to reach record levels in both 2017 and 2018. Early indications are that 2019 will repeat the same but that will depend on new starts in 2017 and 2018. Ignoring 2019 and beyond for the moment, for the next two years we are looking at record levels of spending on infrastructure.

The projected growth rate in infrastructure spending for the two-year period 2017-2018 is expected to reach the largest growth since the period 2005-2008. Construction Analytics (this analyst), FMI and ConstructConnect all predict growth between 10% and 13% or between $30 and $40 billion for this two-year period. My forecast does not include any spending input from a future infrastructure spending plan. 

Spend Infra Jan11 to Jan19 3-7-17

I said earlier that adding $100 billion and maintaining that level of spending for the next ten years is an unrealistic approach. Essentially, that would create an instantaneous need for 400,000 new jobs in the 1st year and then provide no jobs growth for the next nine years.  Construction jobs can’t grow that fast. The maximum jobs growth ever achieved for all infrastructure was 50,000 jobs in a year. And now it’s worth repeating, only 60% of infrastructure is public work.

I’ve suggested another scenario for how it might be possible to ramp up to spend $1 trillion. In another article, Infrastructure – Ramping Up to Add $1 trillion, I laid out how it could be done in 13 years if spending were increased by $10 billion each year. I’ll add here that the entire infrastructure sector has not added a total of $1 trillion new spending in 25 years, so it’s quite unreasonable to assume it could be done in 10 years.

Infrastructure spending for 2017-2018 is about to exceed the historical average growth rate. Any infrastructure plan will replace some, but not all, of the currently planned new work. But it won’t replace any work already in backlog, which is at record levels and still contributes to spending over the next four years. So any infrastructure plan, for the most part, needs to be added on top of the current spending plan. 

It would be extremely difficult to increase spending by another $10 billion/year when current spending is already expected at record levels. In fact, the look ahead for 2018 has spending already increasing by more than $20 billion. There is nothing in our history to suggest we could double the growth rate and sustain that level of spending. Of course, this will point back to the discussion of balance of jobs/volume and available labor in a potentially tight labor market.

The public infrastructure subset of the construction industry appears too small to accommodate a plan to add $1 trillion in spending, even when it only increases at $10 billion/year and absorbs 40,000 new jobs/year. Either the base that we hope to grow needs to be larger from the very beginning (Can public educational buildings be considered part of the plan?) or the rate of growth needs to be slower. Excessively rapid growth will only take volume and jobs away from normal growth, generally leads to rapid inflation and has a devastating effect when a massive program ends and all those jobs disappear.

Spend PubPriv 2016 totals detail 3-22-17

Everything above here is based on new infrastructure plan spending “increasing” total construction spending. The plan is very difficult to achieve. However, if the $1 trillion dollars were used to fund projects that are already within the $150 to $170 billion in new public infrastructure projects that start every year, then there are no issues at all as to how fast or how much in funds can be spent. But that provides for no growth to the industry not already accounted for in the normal growth rate and it provides no new jobs. It simply funds projects that would have been built otherwise and funds the workers already in the industry to keep working. I don’t think this is what everyone has in mind. 

For more on this discussion see  Infrastructure Spending & Jobs

Infrastructure & Public Construction Spending

3-5-17

Infrastructure work does not normally grow in leaps and bounds.

Seldom does infrastructure construction spending grow by more than $10 billion in a year. Rarely does it grow by more than $20 billion.

Currently at about $300 billion a year, infrastructure represents only about 25% of all construction spending. The infrastructure sector is comprised of the longest duration type projects such as energy, highway/bridge, transportation terminals, railway and water/waste water resource development. It is not unusual for projects to take four to five years to reach completion.

Increasing new construction starts by $40 billion for new infrastructure work in any given year on average might add only $8 to $10 billion in spending in each of the next four or five years. To increase spending by $10 billion a year we would need to increase new starts by $40 billion every year. We’ve only ever come close to adding $40 billion in new starts once, in 2015.

In 2015, new infrastructure starts increased by $38 billion or 27%, due to an increase of $13 billion in new power generation plants and an increase of $21 billion in new LNG plants and port facilities. That will keep infrastructure spending growth elevated throughout 2018 and 2019. Measuring a total increase of 250% in power projects, that is a scenario unlikely to be duplicated in coming years.

2017 spending comes from: 10% 2014 starts; 35% 2015; 35% 2016 and 20% new starts in 2017.

Although new infrastructure starts were down in 2016 and are expected to decline again in 2017, the amount of work in backlog at the start of 2017 is the highest its ever been and spending in 2017 is forecast near the all-time (2015) high. Spending in 2018 from backlog will increase again and 2018 will hit another all-time high. There are no annual declines in spending predicted for the next four years. Some very large public infrastructure projects that started in 2014, 2015 and 2016 still contribute large amounts to spending in 2017 and well into 2018.

Increasing infrastructure spending by $10 billion a year would require adding about 35,000 to 40,000 new construction jobs per year. To accommodate all growth since the recession bottom, this sector averaged adding only 20,000 new jobs per year. Current spending growth is predicted to add $40 billion in work over the next three years and this will absorb all new heavy engineering jobs growth. The non-building infrastructure sector does not have the capacity at this time to increase spending by another $10 billion/year over its current growth rate, nor does it have the capacity to add an additional 40,000 jobs per year.

This summary of current projected spending does not include any future infrastructure work that might be generated from a proposed $1 trillion spending plan.

It is important to note here that 90% of all work in the power sector is private work. Only 60% of infrastructure work is publicly funded. However, some nonresidential building is publicly funded.

spend-infra-jan15-to-jan20-3-5-17

Public spending is not all public works projects.

Most public work is infrastructure, or public works projects. However, not all infrastructure is public work. The power market is the largest infrastructure market. But, already noted above, power work is mostly private. So the market responsible for one third of all infrastructure work is 90% private. Educational projects, typically considered nonresidential buildings, are 80% public and 20% private.

Spend PubPriv 2016 totals detail 3-22-17

The two largest markets contributing to public spending are highway/bridge (32%) and educational (25%), together accounting for 57% of all public spending. The next largest market, transportation, is only about 10% of public spending.

Highway/bridge work fluctuates the most with large monthly swings up or down. However, 4 out of 5 times over the last 12 years, any large monthly move up or down was accompanied by a partially offsetting opposite move the following month. Highway spending hit an all-time high in 2015 and again in 2016.

Two of the three largest annual growth increases ever recorded in public spending were driven by educational spending. In the third largest growth year, highway just barely edged out educational spending for the top spot.

If educational work were to be considered part of future infrastructure expansion, then the maximum capacity to increase public infrastructure spending obviously increases. Together with other public works projects this could potentially provide a large enough market base to increase public infrastructure spending by $10 billion a year over and above the growth already in backlog or anticipated. But most of the added work would need to be to the education market. Even with potentially adding educational market work to the infrastructure expansion plan, the hope of expanding infrastructure spending by another $10 billion/year remains difficult at best.

Any increase to future work needs to be considered as over and above the spending growth patterns already due to work in backlog and new starts anticipated. This plot of predicted public spending does not include any future infrastructure work that might be generated from a proposed $1 trillion spending plan. About 80% of all spending in 2017 is already in backlog. About 50% of all the spending from Jan. 2018 through Jan. 2020 will already be in backlog by Jan. 2018.

spend-public-only-015-2019-3-3-17

The following article is an extension of this discussion Calls for Infrastructure Problematic

BTH – 20 Snips From Recent Articles

2-17-17  Behind The Headlines

  1. From the Jan 2011 bottom of the recession in construction to current, both net jobs (jobs x hours worked) and volume (spending after adjusted for inflation) have increased equally by 28%.
  2. Growth of only 100,00 to 140,000 new jobs in 2017 would be the slowest growth in 5 years and will look like a hiring slowdown. Some might attribute it to lack of available workers. In large part it may be due to a balancing of workforce to real volume growth.
  3. Staffing patterns (appear to) lag changes in work volume.
  4. These six Nonresidential Buildings markets, which make up 80% of all nonresidential buildings spending, posted the following growth in starts leading into 2017: Office +37%, Lodging +40%, Educational +11%, Healthcare +21%, Commercial Retail +11% and Amusement/Recreation +21%
  5. Nonresidential buildings 2017 starting backlog is 45% higher than at the start of 2014, the beginning of the current nonres bldgs growth cycle.
  6. Office construction starting backlog for 2017 (projects under contract as of Jan 1, 2017) is the highest in at least 8 years, more than double at the start of 2014 when the current growth cycle of office construction spending began.
  7. For 2017, the amount of construction spending (on manufacturing buildings) from starting backlog has dropped 25% from the level of 2016. Even an increase of 50% in new 2017 starts would not make up for that loss.
  8. More infrastructure projects started construction in the 1st 6mo of 2015 than any time in history. This will boost infrastructure spending through 2017.
  9. As measured in comparable constant dollars, No, we are not back to previous levels of spending. We will probably not return to previous highs before 2020.
  10. The entire construction industry best growth rate ever achieved (in 2016 constant$) absorbed $1 trillion in new spending over 5 years. Infrastructure has not absorbed $1 trillion newly added work in 25 years.
  11. long term best average rates of growth (indicate) we could increase infrastructure spending through new stimulus between $7 billion to $10 billion a year
  12. Construction spending, from 1st release to last revision of data, has been revised upward every month since August 2013. That would indicate the first reports of an “unexpected decline” almost always get revised up in following months.
  13. In the last 36 months, there were 16 Census construction spending releases that initially showed a decline vs the previous month. Five months showed a decline vs the previous year. After revisions every month was revised up from the original posted amount. There remained only 2 significant mo/mo declines. There were no remaining year/year declines.
  14. Current year YTD “not-yet-revised” values for new construction starts are always compared to the previous year YTD “revised values” which has the affect of making current year growth appear lower than it should. In the last 10 years the YTD revisions to previous year values have never been down.
  15. Residential starts in 2016 posted the best year since 2005-2006. Residential starts bottomed in 2009 and have now posted the 7th consecutive year of growth.
  16. Total construction spending in 2017 will reach $1,236 billion supported by a 4th consecutive year of strong growth in nonresidential buildings.
  17. Office construction reached a new all-time high in September 2016. Spending will be in the range of +20% to +30% year over year growth for 2017 with total coming in at $91 billion.
  18. It’s real damn hard to add $100 billion in new construction volume in a year. After adjusting for inflation, construction volume has never increased by $100 billion. It has increased by $75 billion 4 times and 3 more times by $50 billion.
  19. If you want to avoid misusing a cost index, understand what it measures.
  20. Selling Price, by definition whole building actual final cost, tracks the final cost of construction. Selling price indices should be used to (adjust costs for inflation so you can) compare costs over time.
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