Pit & Quarry, February 2019

NEW CONSTRUCTION STARTS DROP 7 PERCENT ew construction starts in November slipped 7 percent from October to a seasonally adjusted rate of 7893 billion according N to Dodge Data Analytics Novembers data measured a reading of 167 for the Dodge Index down from a revised 179 for October returning the index to a level closer to the 166 average for 2017 Amidst the monthly ups and downs the construction start statistics show that on balance the construction industry expansion was still underway in 2018 although the rate of growth has slowed considerably from the 7 percent gains for total construction reported during 2016 and 2017 says Robert Murray chief economist for Dodge Data Analytics Most of the total construction decline was ref lective of a 15 percent drop in nonresidential building a stark contrast to a 43 percent increase in October There There were eight large projects each valued at 500 million or more were eight large projects each valued at 500 million or more totaling 74 billion that increased nonresidential building in October In November however there were just three large projects with a value of 500 million or more totaling 28 billion that were entered as nonresidential building starts The other two major construction sectors witnessed a slight reduction in activity in November as residential building dropped 1 percent while nonbuilding construction dropped 2 percent During the January to November period last year total construction starts on an unadjusted basis were 7382 billion a 1 percent increase from the same time period in 2017 In addition total construction starts for the first 11 months of 2018 were up 2 percent UPDATE AGGREGATE FORECAST By David Chereb Pricing power volume growth shape outlook W e are past the post tax cut initial growth spurt and entering the longer term structural impact This phase while less dramatic has long legs and will show up with continued strength in capital investments i e machinery structures intellectual investments and new business formation The qualifier is that current pro growth policies continue Helping to keep us on this higher growth track is the leveling off of interest rates at least for a while With the new tax rates and changes now evident to everyone the general movement of people and businesses toward warmer lower cost areas will continue This means the 60 plus year move to Sun Belt states will accelerate but be more spread out as those states just north of Florida and Georgia capture more of the flow Add to this the increased attractiveness of most of the Mountain Region states These economic and business changes mean all segments of construction materials will do well with residential and nonresidential plateauing at high levels and nonbuilding providing the bulk of materials growth over the next two to three years Residential is about flat due to the high price of new housing a shift in millennial preferences for renting in more urban areas and the lack of adequate down payments For nonresidential construction we are still in the midst of the Amazon effect This is a huge structural change for retail and to Dr David Chereb has many years of experience forecasting construction materials and his webbased forecasting models have captured every major turning point in materials demand for more than 15 years Chereb received his Ph D in economics from the University of Southern California He can be reached at david chereb@ sc marketanalytics com a lesser extent other commercial activity preventing any large overall increase in demand from this segment Nonbuilding is doing and will do the best With the economy growing strongly for several years local conditions are good enough to spend more on infrastructure Also with a new Congress there is an increased probability for more federal money even though its chances of passage remain below 50 percent Overall the outlook remains good with excellent pricing power and good volume growth U S Aggregate Demand billions of metric tons 2014 2015 2016 2017 2018est 2019est 2020est RESIDENTIAL 048 052 057 057 058 055 053 NON RESIDENTIAL 065 069 072 070 072 071 072 NON BUILDING 106 105 103 100 107 116 124 TOTAL 219 226 232 227 237 242 249 Yr Yr Ch 68 32 27 22 44 21 20 Source S C Market Analytics 78 PIT QUARRY February 2019 pitandquarry com