Construction Put in Place Data for October

Total Construction

Total construction expenditures revised upward for August and September. Month over month, October declined by 0.7 percent. October was up by 1.6 percent compared to October last year. Each month May through October the three-month growth rate was lower than the 12-month rate meaning that momentum was negative. Momentum was positive each month in the period August 2019 through April 2020. Construction activity has responded much more slowly than manufacturing to the COVID-19 situation due to project commitments. In October, construction expenditures totaled $108.9 billion. This breaks down to $77.2 billion of private work, $29.5 billion of state and locally funded (S&L) work, and $2.2 billion of federally funded work (Table 1).

Figure 1 shows total construction expenditures on a rolling 12-month basis as the blue line and the rolling three-month year-over-year growth rate as the brown bars. Total construction was at an all-time high in the single month of September this year with a month-on-month decline of 0.7 percent in October. On the rolling 12-months basis shown in Figure 1, October was the highest level of expenditures ever and the 12-month periods through April and October were the only months ever in which the rolling 12-month total exceeded $1.2 trillion. The brown bars in Figure 1 show growth on a 3MMA basis year over year. Growth slowed from 8.1 percent in February to negative 0.03 in September and recovered to 0.5 percent in October. In 12 months through October 2020, construction expenditures totaled $1.201 trillion. (This number excludes residential improvements; see explanation below.) 

Figures 1, 2, 7, 8 and 10 in this analysis have the same format, the result of which is to smooth out variation and eliminate seasonality. We consider four sectors within total construction: nonresidential, residential, infrastructure and other. The latter is a catchall and includes industrial, utilities and power.

Private Construction

Table 2 shows the breakdown of private expenditures into residential and nonresidential and subsectors of both. The growth rate of private construction in three months through October was 0.1 percent, down from positive 7.3 percent in three months through February, but up from negative 2.6 percent in July as shown by the brown bars in Figure 2.

Excluding property improvements, single-family residential expanded by 8.3 percent in three months through October with positive momentum and multifamily residential expanded by 14.6 percent also with positive momentum. Seven of the nine sectors within nonresidential construction declined and momentum was negative for all except the religious buildings. The CPIP that is the main focus of this report is based on spending work as it proceeds; the value of a project is spread out from the project’s start to its completion. The Census Bureau reports separately on construction starts in which data for the whole project is entered into the database when ground is broken. Total housing starts expanded by 9.3 percent in three months through October year over year. The total is broken down into single-family and multifamily starts. Single-family starts expanded by 21.3 percent and multifamily declined by 16.6 percent in three months through October year over year. Figure 3 shows the growth of both housing sectors since January 2005.

Figure 4 shows total housing starts in four regions with the South being the strongest and the Northeast the weakest. All four regions suffered major declines this year beginning in March, but have partially recovered since May. The National Association of Home Builders optimism index crashed in April and recovered each month May through October as shown in Figure 5.

State and Local Construction

Total S&L expenditures recovered more slowly than private work from the last recession and are again showing a delayed reaction as they are holding up better than private expenditures today. This includes both infrastructure and nonresidential buildings. In three months through October, total S&L construction expanded by 1.5 percent and all building sectors had positive year-over-year growth on both a three-month and 12-month basis. In addition, health care and commercial had positive momentum (Table 3). Educational is by far the largest subsector of S&L nonresidential buildings at $7.1 billion in October, but had only slightly over zero growth in three months through October. Figure 6 shows the history of total S&L expenditures.

Drilling down into the private and S&L sectors as presented in Tables 2 and 3 shows which project types should be targeted for steel sales and which should be avoided. There are also regional differences to be considered, data for which is not available from the Commerce Department.

Infrastructure

Infrastructure expenditures have had positive growth since January 2019. Year over year the growth of infrastructure expenditures in three months through October was 0.9 percent, down from 9.6 percent in February. (Note: There is no seasonality in this report as it includes only year-over-year data.) Highways and streets including pavement and bridges account for almost three quarters of total infrastructure expenditures. Highway pavement is the main subcomponent of highways and streets and had a 6.5 percent growth in three months through October. Bridge expenditures have had a double-digit contraction rate every month since September 2019. Table 4 shows the breakdown of infrastructure expenditures in three months and 12 months through October and Figure 7 shows the rolling 12-month history of infrastructure expenditures and the year-over-year growth rate.

Total Building Construction Including Residential

Figure 8 compares year-to-date expenditures for the construction of the various building sectors for 2019 and 2020. Single-family residential is dominant and in the first half of 2020 expenditures totaled $268.2 billion annualized.

Figure 9 shows total expenditures and growth of nonresidential building construction. Growth has slowed every month since November 2019 and in October 2020 reached negative 5.0 percent.

Explanation: Each month, the Commerce Department issues its Construction Put in Place (CPIP) data, usually on the first working day covering activity one month and one day earlier. There are three major categories based on funding source: private, state and local, and federal. Within these three groups are about 120 subcategories of construction projects. At SMU, we analyze the expenditures from the three funding categories to provide a concise summary of the steel consuming sectors. For example, we combine all three to reach a total of nonresidential building expenditures.

CPIP is based on spending work as it occurs and is estimated each month from a sample of projects. In effect, the value of a project is spread out from the project’s start to its completion. This is different from the starts data published by the Census Bureau for residential construction, by Dodge Data & Analytics and by Reed Construction for nonresidential, and by Industrial Information Resources for industrial construction. In the case of starts data, the whole project is entered into the database when ground is broken. The result is that the starts data can be very spiky, which is not the case with CPIP.

The official CPIP press release gives no appreciation of trends on a historical basis and merely compares the current month with the previous one on a seasonally adjusted basis. The background data is provided as both seasonally adjusted and non-adjusted. The detail is hidden in the published tables, which SMU tracks and dissects to provide a long-term perspective. This is a very broad and complex subject, therefore, to make this monthly write-up more comprehensible, we keep the information format as consistent as possible. In our opinion, the magnitude of growth or contraction of the various sectors is more important than the absolute dollar value of the expenditures. CPIP data also includes the category of residential improvements, which we have removed from our analysis because such expenditures are minor consumers of steel.

In the four tables included in this analysis, we present the non-seasonally adjusted expenditures for the most recent data release. Growth rates presented are all year over year and are the rate for the single month’s result, the rolling three months and the rolling 12 months. We ignore the single month year-over-year result in our write-ups because these numbers are preliminary and can contain too much noise. The growth trend columns indicate momentum. If the rolling three-month growth rate is stronger than the rolling 12 months, we define that as positive momentum, or vice versa. In the text, when we refer to growth rate, we are describing the rolling three-month year-over-year rate. In Figures 1, 2, 6, 7 and 9, the blue lines represent the rolling 12-month expenditures and the brown bars represent the rolling three-month year-over-year growth rates.