The United States construction ordspråk

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The United States construction industry is ready to digest this large increase in capacity. Regions with a vibrant economic base dominate the location of plant expansions and the related escalation in private, commercial, and public infrastructure construction will require additional materials.

Ed Sullivan (1902-1974)

Construction spending is always a lagging economic indicator, especially in commercial construction, because of the time it takes to plan, execute and build. I expect housing to be a stabilizer, but commercial construction to be a drag on economic growth for a while to come.

Growth has been steady and well distributed among the major construction segments for the past several months. For the first 11 months of 2005, total construction was nine percent higher than in same months of 2004. Private residential construction grew 11 percent, public construction, eight percent, and private nonresidential, five percent.

As was the case for most of the year, growth was well distributed among the major construction segments. Comparing December 2005 to December 2004, public construction grew 10%, private residential construction rose 9.0%, and private nonresidential was up 6.0%. For the year, those categories increased 8.0%, 11%, and 5.0%, respectively.

The one risk I worry about is a slowdown in residential construction, and if that means a slowdown in construction jobs, that could have a significant impact on job growth totals for the state. A lot of our job gains have been construction and construction-related. At one time, as much as 40 percent of job gains were related to building things.

Materials for construction are part of a world market, and the demand created in Louisiana is virtually insignificant. A large part of the reason why materials will go up are related to futures markets on commodities.

The tragic effects of terrorism have forced the new-construction industry to re-evaluate traditional methods of fire protection in commercial infrastructures. That includes everything from building codes, to structural design issues and the less durable fireproofing materials currently specified for commercial steel structures.

Housing starts appear to have peaked in the second quarter of 2005. Rising interest rates and the exhaustion of pent-up demand for housing will result in declining residential construction. Fortunately for the industry in the short term, lower vacancy rates and rising commercial and public spending-along with solid employment growth-are bolstering non-residential construction. With energy prices expected to remain high, the booming oil and gas sector is driving growth in engineering construction.

Louis Thériault

A lot is being done to bring additional protective measures, particularly the critical infrastructure locations around the United States, ... There is a very active ... program of coordination on this particular period of time with both public and private entities and at the federal, state and local levels.

Condoleezza Rice

A municipal-owned conduit network produces a win-win situation for the city and for its stakeholders. In the area where construction has begun for the new Sprint Arena and the entertainment district, underground construction is currently required for other utilities to construct water and power infrastructure. Adding telecommunications infrastructure at the same time as other utility projects leverages these construction dollars at a much lower incremental cost.

The overall momentum in construction remains solid. We expect this pattern to continue, with public and commercial construction taking the leadership baton in 2006 as housing starts ease back moderately.

In 1862, when the charter was granted by the United States Government for the construction of a railroad from Omaha to the Pacific coast, the only States west of the Mississippi Valley in which any railroad construction of importance existed were Iowa and Missouri.

On a two-month basis, there were several segments that showed exceptional growth. Shopping center construction leaped 61%, after swelling nearly 40% in 2005 and 25% in 2004. Hospital construction grew 22%, while manufacturing and commercial warehouse construction climbed 20%. The previously lackluster office segment was up 18%.

The current budget for the plant upgrade is sizable at approximately $75 million, including $56.6 million in a guaranteed construction contract. While historical system financial performance has been healthy, adequate coverage on the 2006 bonds will require a significant increase in net revenues. The city council and sanitary district boards have already approved rate increases of 32% in fiscal 2006 and an additional 59% over the next three years, to $65.68 in fiscal 2009. While high, these rates would not be the highest for comparable sanitary districts in northern California, and the rate increases have gone through the required public hearing process.

The differences in expectations of construction executives versus their peers in other industries is striking. Growth in the construction sector, coupled with higher costs for construction materials and hiring pressures, will be watched closely by the Federal Reserve as it determines future interest rate policy for the economy in general.

Gregg Steinberg

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