ABC Reports: Nonresidential Construction Spending Falters in August

CEU2“After a significant acceleration in spending in July, August’s report depicts a steady but unspectacular recovery.”—ABC Chief Economist Anirban Basu.

Construction_Spending_10 1Nonresidential construction spending slipped in August, according to an Oct. 1 release from the U.S. Census Bureau. Nonresidential construction spending shrank 1.2 percent on a monthly basis in August, but has still managed to expand 6 percent on a year-over-year basis. Spending for the month totaled $603.7 billion on a seasonally adjusted, annualized basis. The government also revised the July spending figure down from $617.8 billion to $611.3 billion.

“This is why it is never a good idea to get excited about one month of data,” said Associated Builders and Contractors Chief Economist Anirban Basu. “After a significant acceleration in spending in July, August’s report depicts a steady but unspectacular recovery. Based on various industry surveys, including ABC’s own confidence and backlog indicators, the steady pace of recovery will continue.

“Macroeconomic fundamentals remain promising for growth moving forward,” said Basu. “Job growth has been reasonably steady during the past 12 months and the quality of jobs added to the economy has improved during the course of the current year, which helps explain the ongoing recovery in office-related spending. Federal Reserve policy remains accommodative and interest rates remain benign, which will help support business investment, including in construction, going forward. Consumer spending also should help prompt additional construction, including in the lodging and amusement/recreation categories.”

Seven of 16 nonresidential construction subsectors posted increases in spending in August on a monthly basis.

  • Office-related construction spending grew 1.1 percent in August and is up 18.9 percent from the same time one year ago.
  • Manufacturing-related spending grew 1.7 percent on a monthly basis and is up 14.5 percent on an annual basis.
  • Lodging construction spending is up 0.9 percent on a monthly basis and is up 10.2 percent on a year-over-year basis.
  • Amusement and recreation-related construction spending grew 0.9 percent on a monthly basis and is up 3 percent from the same time last year.
  • Communication construction spending expanded 3.4 percent for the month, but is down 10.5 percent on a year-over-year basis.
  • Religious spending grew 0.9 percent for the month and is up 1.4 percent from the same time last year.
  • Sewage and waste disposal-related construction spending gained 0.8 percent for the month and has grown 3.5 percent on a 12-month basis.

Spending in nine nonresidential construction subsectors declined in August.

  • Conservation and development-related construction spending fell 2.5 percent for the month, but is up 19.8 percent on a yearly basis.
  • Health care-related construction spending fell 0.6 percent for the month and is down 6.6 percent for the year.
  • Education-related construction spending fell 2 percent for the month and is down 1.9 percent on a year-over-year basis.
  • Spending in the water supply category fell 4 percent from July and is 1.8 percent lower than at the same time last year.
  • Construction spending in the transportation category fell 2.9 percent on a monthly basis, but has expanded 3 percent on an annual basis.
  • Highway and street-related construction spending fell 0.6 percent in August and is down 0.2 percent compared to the same time last year.
  • Public safety-related construction spending fell 5 percent on a monthly basis and is down 6 percent on a year-over-year basis.
  • Power construction spending fell 3.4 percent for the month, but is 16.3 percent higher than at the same time one year ago.
  • Commercial construction spending declined 3.1 percent in August, but is up 9.4 percent on a year-over-year basis.

To view the previous spending report, click here

Wells Fargo Reports: Construction Spending Disappoints in August

Wells_Fargo_Securities_logoThe nominal value of construction spending put-in-place fell 0.8 percent in August with downward revisions to data in the previous two months. Private residential and nonresidential both posted declines.

Overall Construction Spending Weaker than Expected

Construction spending fell 0.8 percent in August to a $961.0 billion annual pace. Declines were broad based, with total residential spending down 0.1 percent and nonresidential falling 1.2 percent. Public construction outlays fell 0.9 percent in August, which was mostly due to weakness in state and local highway, street and education spending.

Although the report was weaker than expected, construction spending is well known for its wide monthly swings. That said, the overall trend still points to gradual upward momentum. Overall spending on a three-month annualized basis is up at a 0.9 percent rate, with nonresidential increasing at a 6.1 percent pace. On the other hand, residential is down 7.2 percent on a three-month annualized basis.

Private residential construction spending fell a modest 0.1 percent, with home improvement pulling the headline lower. Home improvement has declined in seven of the last eight months and is down 10.3 percent over the past year. The string of negative readings in this component suggests the pickup in home remodeling is winding down. Spending on home improvement likely peaked in December 2013 and is now down 18 percent from that high in August. Although housing market indicators remain mixed, single-family spending eked out a modest 0.7 percent increase, its second monthly gain. Multifamily construction outlays also rose in August, increasing 1.4 percent. Apartment demand remains strong, as young adults still prefer to rent rather than own, especially in gateway cities.

Private nonresidential construction spending fell 1.4 percent in August, and is now up 9.2 percent from a year earlier. Despite the decline, manufacturing, communication and lodging made the largest contributions to the headline, while power fell on the month. Manufacturing outlays have shown solid gains in recent months and are up almost 15 percent over the past year. Much of the improvement in this component is due to the shale gas boom as chemical companies that use natural gas as an energy source or as feedstock take advantage of record-low natural gas prices. Chemical manufacturing is up a whopping 57.2 percent from a year earlier and rose 3.3 percent in August. Excluding chemical manufacturing, manufacturing spending fell 0.1 percent during the month.

Looking Ahead: Nonresidential Spending Still on Track

Overall construction spending has improved at a sluggish pace but should gain traction along with better economic growth. Leading nonresidential indicators, including starts, architectural billings and the Dodge Momentum Index, suggest conditions are improving. In the months ahead, we should see increased spending from the $957 million Nordstrom Tower located in midtown Manhattan. Outlays for the second tallest building in the country will show up in residential, retail, and hotel.

1 2 3Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

TRIP Report: The Condition and Funding Needs of New York’s Local Roads & Bridges

TRIPNew York State’s Local Roads And Bridges Have Significant Deterioration; Conditions Will Worsen Under Current Funding Levels, Which Would Need To Nearly Triple Over Next Decade To Make Needed Road And Bridge Repairs

Nearly half of New York’s locally maintained roads are in need of rehabilitation, preservation or reconstruction and almost one-third of locally maintained bridges are deficient and in need of corrective maintenance or rehabilitation. However, local governments face a significant shortfall in funding needed to maintain and repair the roads, according to a new report released today by TRIP, a Washington, DC based national transportation organization.

The TRIP report, The Condition and Funding Needs of New York’s Local Roads and Bridges,” finds that a total of 47 percent of the state’s locally maintained roads are in need of rehabilitation or reconstruction. Fifteen percent of New York’s local roads are rated in poor condition. Roads rated poor are in the later years or beyond their service life, show significant signs of deterioration, and need to be replaced or reconstructed.   In some cases, poor roads can be resurfaced but often are too deteriorated and must be reconstructed. An additional thirty-two percent of New York’s locally maintained roads in need of rehabilitation or preservation to correct adverse effects of age and wear. A desirable goal for state and local organizations that are responsible for road maintenance is to keep 75 percent of major roads in good condition. Thirty-four percent of New York’s locally maintained roads are in good condition and 19 percent are in excellent condition. Roads in good condition require maintenance and minor repairs to protect pavements from avoidable deterioration, while roads in excellent condition require only drain cleaning and crack sealing.

In addition to deteriorated road conditions, a total of 31 percent of New York’s locally maintained bridges are in need of corrective maintenance or rehabilitation to restore the bridge to good condition. Seven percent of locally maintained bridges have serious deterioration that require significant repairs while an additional 24 percent of locally-maintained bridges are rated as deficient and will require corrective maintenance or rehabilitation to restore the bridge to fully functional, non-deficient condition. Of the remaining bridges, 31 percent are in good condition and 38 percent are in excellent condition. Bridges in good condition require regular maintenance and minor upgrades or repairs, while bridges rated excellent need only regular cleaning and sealing.

The TRIP report is based on surveys that were completed by local governments in New York. Forty-two of New York State’s 62 counties and 29 of its municipalities completed the TRIP local roads and bridges survey.

“Having a modern system of roads and bridges in New York State must be a priority,” said Timothy Hens, president of the New York State County Highway Superintendents Association and the Highway Superintendent of Genesee County. “The TRIP report is yet another confirmation that investment in the state’s transportation infrastructure has for years been far short of what is needed. Consequently, we continue to fall further and further behind in our efforts to maintain the system, especially our local roads and bridges. It is therefore critical that the next state Five Year Transportation Capital Plan boosts investment in our transportation infrastructure to ensure its continued safety and functionality and to secure New York’s competitiveness for economic development and job creation for all communities throughout the state.”

Agencies responsible for maintaining New York’s local transportation systems estimate a significant shortfall in needed funds to maintain and repair roads, bridges and highways. The current amount of annual spending on New York’s local roads and bridges would need to increase by 64 percent in order to keep locally maintained roads and bridges in their current condition over the next decade. In order to improve the condition of all locally maintained roads, highways and bridges to good condition or better, the current amount of annual spending over the next decade would need to nearly triple.

The efficiency of New York’s transportation system, particularly its highways, is critical to the health of the state’s economy. A 2007 analysis by the Federal Highway Administration found that every $1 billion invested in highway construction would support approximately 27,800 jobs. The Federal Highway Administration estimates that each dollar spent on road, highway and bridge improvements results in an average benefit of $5.20 in the form of reduced vehicle maintenance costs, reduced delays, reduced fuel consumption, improved safety, reduced road and bridge maintenance costs and reduced emissions as a result of improved traffic flow.

“New York’s locally maintained roads will require significant rehabilitation and modernization in order to provide a high quality of life for the state’s residents and an attractive economic climate for businesses and industries,” said Will Wilkins, TRIP’s executive director. “The state’s counties and municipalities must have the funding to make the maintenance, repair and upkeep of their transportation system a top priority.”

Executive Summary

New York’s extensive system of roads, highways and bridges provides the state’s residents, visitors and businesses with a high level of mobility. New York’s locally maintained roads provide for travel to work and school, visits with family and friends, and trips to tourist and recreation attractions while simultaneously providing businesses with reliable access for customers, suppliers and employees.

A variety of agencies are responsible for the maintenance and repair of New York’s system of roads and bridges. In addition to transportation assets maintained by federal or state agencies, New York’s local governments are responsible for the repair, maintenance and upkeep of nearly 9,000 bridges (more than half of the bridges in the state) and over 100,000 miles of roads (approximately six out of every seven miles of roads in the state). With already strapped budgets, counties and municipalities must allocate increasingly scarce resources to the maintenance, repair and upkeep of their transportation systems. As a result, a significant portion of New York’s locally maintained roads and bridges is in need of repair or replacement and the current amount of annual transportation funding for local roads is just one-third of what counties and municipalities estimate is needed to make needed repairs to their roads and bridges over the next decade.

New York will need to improve the physical condition of its transportation network and enhance the system’s ability to provide efficient and reliable mobility for residents, visitors and businesses. Making needed improvements to local roads, highways and bridges could provide a significant boost to the state’s economy by creating jobs and stimulating long-term economic growth as a result of enhanced mobility and access. Meeting New York’s need to modernize and maintain its system of local roads, highways and bridges will require a significant, long-term boost in transportation funding at the federal, state and local levels.

To prepare this report, TRIP compiled survey responses from town, city, municipal and county governments in New York that completed a TRIP survey on road and bridge conditions, current transportation spending and the annual funding needs of each county or municipality over the next decade. Information on the condition of roads and bridges and needed funding levels for each local government that responded to the TRIP survey can be found in the appendix of the report.

Agencies responsible for maintaining New York’s local roads and bridges estimate a significant shortfall in needed funds to maintain and repair roads, bridges and highways. At current levels of funding, the condition of locally maintained roads and bridges in New York will worsen and repair costs will escalate. Addressing road and bridge deficiencies before they further worsen will save money because it will be much more costly to make repairs if conditions worsen.

  • In order to improve the condition of all locally maintained roads, highways and bridges to good condition, the current amount of annual spending over the next decade would need to nearly triple.
  • The current amount of annual spending on New York’s local roads and bridges would need to increase by 64 percent just to keep locally maintained roads and bridges in their current condition over the next decade.
  • A 2013 study of local roads and bridges by the New York State Town Highway Superintendents Association projected that the funding needs for local roads and bridges totaled $34.8 billion through 2030.
  • Long-term repair costs increase significantly when road and bridge maintenance is deferred, as road and bridge deterioration accelerates later in the service life of a transportation facility and requires more costly repairs. A study by the Cornell Local Roads Program estimates that every $1 of deferred maintenance on roads and bridges costs an additional $4 to $5 in needed future repairs.
  • Forty-two of New York State’s 62 counties and 29 of its municipalities completed the TRIP local roads and bridges survey.

Population increases and economic growth in New York have resulted in increased demands on all of the state’s roads and bridges, leading to increased wear and tear on the transportation system.

  • New York’s population reached 19.6 million in 2012, an increase of nine percent since 1990. While the state’s overall population has increased slightly in recent years, the lagging economy has caused a decline in population upstate. Upstate New York lost young adults (those between 25 and 34 years old) at a rate of 17 percent per decade since 1990.
  • New York had 11,248,617 licensed drivers in 2012.
  • Vehicle travel in New York increased 20 percent from 1990 to 2012 – from 106.9 billion vehicle miles traveled (VMT) in 1990 to 128.2 billion VMT in 2012.
  • By 2030, vehicle travel in New York is projected to increase by another 10 percent.
  • From 1990 to 2012, New York’s gross domestic product, a measure of the state’s economic output, increased by 36 percent, when adjusted for inflation.

Nearly half – 47 percent –of New York’s locally maintained roads are in need of rehabilitation, preservation or reconstruction.

  • Fifteen percent of New York’s local roads are rated in poor condition. Roads rated poor are in the later years or beyond their service life, show significant signs of deterioration, and need to be replaced or reconstructed.
  • Thirty-two percent of New York’s locally maintained roads are in need of rehabilitation or preservation to correct the adverse effects of age and wear.
  • Although a desirable goal for state and local organizations that are responsible for road maintenance is to keep 75 percent of major roads in good condition, 34 percent of New York’s locally maintained roads are in good condition and 19 percent are in excellent condition. Roads in good condition require maintenance and minor repairs to protect pavements from avoidable deterioration, while roads in excellent condition require only drain cleaning and crack sealing.

 

Pavement Rating Percentages
Poor 15%
Correct 32%
Good 34%
Excellent 19%

Nearly a third – 31 percent — of locally maintained New York bridges are deficient and in need of corrective maintenance or rehabilitation to restore the bridge to good condition.

  • In New York State, bridge inspectors assess all of a bridge’s individual parts in order to assign a condition score. The New York State Department of Transportation condition rating scale ranges from one to seven, with seven being in new condition and a rating of five or greater considered as good condition. The NYSDOT considers any bridge rated below a five to be deficient.
Bridge Rating Percentages
Poor: <4 7%
Correct: >4 but <5 24%
Good: >5 but <6 31%
Excellent: >6 38%

 

  • Bridges rated below four have serious deterioration at a level that requires corrective maintenance or rehabilitation to restore the bridge to its fully functional, non-deficient condition. Bridges rated between four and five have deterioration that will also require corrective maintenance or rehabilitation.
  • Bridges in good condition (with a rating between five and six) require regular maintenance and minor upgrades or repairs, while bridges rated excellent (with a rating above six) need only regular cleaning and sealing.

The efficiency of New York’s transportation system, particularly its highways, is critical to the health of the state’s economy. Businesses are increasingly reliant on an efficient and dependable transportation system to move products and services. A key component in business efficiency and success is the level and ease of access to customers, markets, materials and workers.

  • Annually, $550 billion in goods are shipped from sites in New York and another $597 billion in goods are shipped to sites in New York, mostly by truck.
  • Seventy-two percent of the goods shipped annually from sites in New York are carried by trucks and another 22 percent are carried by courier services or multiple mode deliveries, which include trucking.
  • Increasingly, companies are looking at the quality of a region’s transportation system when deciding where to re-locate or expand. Regions with congested or poorly maintained roads may see businesses relocate to areas with a smoother, more efficient and more modern transportation system.
  • Businesses have responded to improved communications and greater competition by moving from a push-style distribution system, which relies on low-cost movement of bulk commodities and large-scale warehousing, to a pull-style distribution system, which relies on smaller, more strategic and time-sensitive movement of goods.
  • Highway accessibility was ranked the number one site selection factor in a 2011 survey of corporate executives by Area Development Magazine.
  • A 2007 analysis by the Federal Highway Administration found that every $1 billion invested in highway construction would support approximately 27,800 jobs, including approximately 9,500 in the construction sector, approximately 4,300 jobs in industries supporting the construction sector, and approximately 14,000 other jobs induced in non-construction related sectors of the economy.
  • The Federal Highway Administration estimates that each dollar spent on road, highway and bridge improvements results in an average benefit of $5.20 in the form of reduced vehicle maintenance costs, reduced delays, reduced fuel consumption, improved safety, reduced road and bridge maintenance costs and reduced emissions as a result of improved traffic flow.

For the completer report visit: tripnet.org

Sources of information for this report include responses to a TRIP survey from individual New York municipalities and counties, the Federal Highway Administration (FHWA), the U.S. Census, and The Bureau of Transportation Statistics (BTS). All data used in the report is the latest available

TRIP Report: America’s Rural Roads and Bridges

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