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Construction is Booming. Well, OK, construction is setting up to be booming in 2023-2024. New construction starts for Sept are down 19% from August and yet starts are still near the highest levels ever. Sept is 4th highest total starts ever, all four of the highest ever months of new starts are in 2022. July and Aug were the two highest months of new starts ever. Total growth in starts over 2021-2022 – Nonres Bldgs +50% Nonbldg Infra +21% Residential +22%.
STARTS
Construction Spending will not be participating in a 2023 recession. Except, residential might. Residential starts in 2021 were up +21% to a really high new high. But starts are forecast flat in 2022 and 2023. Spending grew 44% in the last 2yrs, but inflation was 30% of that 44%. With zero growth in starts forecast for 22-23, spending struggles to keep up with inflation. Residential will post only an increase of 3% in 2023 spending, but midyear there is potential for 6 consecutive down months.
SPENDING BY SECTOR CURRENT $ AND INFLATION ADJUSTED CONSTANT $
Nonres Bldgs new starts last 2yrs (2021-2022) are up 50%. Spending next 2yrs is forecast up 22%.
Nonbldg starts 2022-23 are forecast up 50%. Spending 2023-24 forecast up 20%.
Residential construction (Dodge) starts since Jan 2021 have posted 17 out of 21 months of the highest residential starts ever posted. The 5 highest months ever are all in 2022.
Nonresidential Bldgs starts in Sept dropped 23% from August and yet still that was the 3rd highest month ever. July and August were 2nd and 1st.
Construction Spending Sept total up 0.2% from Aug. Aug & Jul were revised up 1.1% & 1.3%. Total spending YTD thru Sept’22 is up 11.4% from Sept’21. MAJOR movers; Mnfg up 16% since Jun. Jul & Aug were revised up 7.4% & 8.4%. Highway is up 9% since June. Jul & Aug were revised up by 4.0% & 4.4%.
SPENDING FORECAST
Total construction spending for 2022 is on track to increase +11.1%. Residential +16.8%, Nonres Bldgs +9.5%, Nonbldg +0.5%.
Comm/Rtl +18% Mnfg +32% Power -8% Pub Utilities +14%.
Inflation adjusted total volume for 2022 falls 1%. Residential +3%, Nonres Bldgs -1%, Nonbldg -9%
SPENDING TOTAL ALL $ CURRENT $ AND INFLATION ADJUSTED CONSTANT $
Overall Construction Spending is up 15% since the onset of the pandemic, but, after inflation, volume is down 10%. Residential jobs are near even on track with volume, but Nonres and Nonbldg have volume deficits of approx 20-25% vs jobs.
- Feb 2020 to Aug 2022
- Resdn spend +42%, vol +6.5%, jobs +7%
- Nonres Bldgs spend -8%, vol -24%, jobs -3%
- NonBldg spend -7.5%, vol -24%, jobs +1%
JOBS VS CONSTRUCTION VOLUME VS SPENDING (VOL = SPENDING MINUS INFLATION
Labor Shortage? Jobs should track volume, not spending growth. Vol = spending minus inflation. Volume is down while jobs are up. If the same production levels ($ put-in-place per worker) as 2019 were to be regained, theoretically, nonresidential volume could increase 20% with no increase in nonresidential jobs. I don’t expect that to occur, therefore, productivity will remain well below that of 2019.
LABOR PRODUCTIVITY
Over the next year or two, there could be several billion$ of construction spending to repair hurricane damaged homes in Florida. That spending will NOT be reported in Census spending reports. Renovations to repair natural disaster damage are not recorded in construction spending. Construction spending to replace homes entirely lost to damage IS reported in Census spending, but is reported as renovations/repair, not new SF or MF construction.
RESIDENTIAL SPENDING SF-MF-RENO CURRENT $ AND CONSTANT $
