Quarry Equipment Marketplace

JUL 2018

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Q E M Q uarry Equipment M a r k e tpl a ce ยจ May Construction Starts Climb; Highways Plummet At a seasonally adjusted annual rate of $783.6 billion, new construction starts in May advanced 15 percent from April, according to Dodge Data & Analytics. The increase follows a 12 percent decline in April, and shows total construction activity reaching the highest level reported over the past eight months. The lift in May came from substantial gains for nonbuilding construction, up 39 percent; and nonresidential building, up 18 percent; as both sectors benefitted from the start of several very large projects. Highway and bridge construction dropped 26 percent. Nonbuilding construction, and specifically its public works segment, was boosted by the start of three large natural gas pipelines with a combined construction start cost of $4.6 billion, plus $1.4 billion related to the start of an environmental cleanup project at the Los Alamos National Laboratory in New Mexico, a $1.4 billion rail transit project in Los Angeles and a $1.1 billion rail transit project in the Boston area. Nonresidential building was aided by the start of a $1.0 billion Facebook data center in Nebraska, the $764 million expansion to the Washington State Convention Center in Seattle and a $740 million airport terminal project at Salt Lake City International Airport. Meanwhile, residential building in May held steady with its April pace. Through the first five months of 2018, total construction starts on an unadjusted basis were $299.9 billion, down 3 percent from the same period a year ago. "During the first five months of 2018, total construction starts have shown an up-and-down pattern, with May coming in strong after a subdued April," stated Robert A. Murray, chief economist for Dodge Data & Analytics. "Much of the volatility in early 2018 has come from the public works sector, affected by the presence of unusually large project starts during a given month such as what took place in May. In addition, the nonresidential building sector showed resilience in May, bouncing back after a lackluster performance in April. "On balance, the pace of total construction starts is staying close to the levels achieved over the past year, when activity grew 5 percent," Murray continued. "It's true that the construction industry is facing increased headwinds, such as higher material prices and the recent pickup in interest rates, but to this point they have not yet produced a discernible negative impact on the overall level of construction starts. On the plus side, the public works and institutional building sectors continue to benefit from the state and local bond measures passed in recent years. The public works sector should also benefit from the increased federal funding for transportation projects included in the March 2018 federal appropriations bill. While market fundamentals such as rents and vacancies have weakened for multifamily housing, they still remain relatively healthy for warehouses and offices. Bank lending standards for nonresidential building projects have eased slightly, and the recent rollback of Dodd-Frank regulatory constraints on mid-size regional banks may lead to more funding for construction projects in the near term." Nonbuilding Construction Nonbuilding construction in May was $222.1 billion (annual rate), rebounding 39 percent after sliding 23 percent in April. The public works project types as a group surged 47 percent, boosted by a 169 percent jump by the miscellaneous public works category that includes pipelines, rail transit, and site work. There were three substantial natural gas pipeline projects entered as construction starts in May โ€“ the $2.1 billion Mountaineer Xpress Pipeline in West Virginia, the $1.9 billion Gulf Coast Express Pipeline in Texas and the $600 million Gulf Xpress Project that involves new compressor stations in Kentucky, Tennessee and Mississippi. In addition, there were two substantial rail transit projects entered as construction starts in May โ€“ the $1.4 billion Westside Purple Line Extension (section 2) in Los Angeles and the $1.1 billion Green Line Extension in Somerville, Mass. The sewer and hazardous waste category soared 196 percent in May, reflecting $1.4 billion related to the start of environmental cleanup work at the Los Alamos National Laboratory in New Mexico that will span up to 10 years. Water supply construction and river/harbor development registered similar gains in May, rising 25 percent and 22 percent respectively, with the latter helped by the start of a $310 million flood mitigation project in Brooklyn, N.Y. Highway and bridge construction was the one public works project type to recede in May, dropping 26 percent as it continues to retreat after very strong activity in March. Through the first five months of 2018, highway and bridge construction starts were still up 4 percent compared to last year. Page 20 QEM โ€“ Quarry Equipment Marketplace July 2018

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