Commercial construction down 71% in June
The Associated General Contractors of America reported a national drop in commercial construction of 71 percent during June compared with the previous month.
The drop wiped out gains seen in May, when commercial construction rose 27 percent.
“Every construction category declined significantly in June,” said Jim Haughey, an economist for Reed Construction, in a statement. “The May/June boom/bust is substantially random.”
The drop shows that nonresidential construction is entering the weakest period in the business cycle, he said. Compared to June 2008, however, the drop was 22 percent, and Haughey said he believes that’s a better indicator for the rest of the year.
“The current bid calendar suggests that much of the June drop will be reversed in the next few months,” he said.
The contractors also reported that falling prices for construction materials may be nearing an end. Nucor-Yamato Steel announced it was raising prices to match an earlier announcement by Gerdau Ameristeel; a concrete company announced a hike in aggregates and liquid asphalt prices also are edging up.
Agree that a 71% month to month decline is obviously not sustainable and that the declines for the rest of the year are more likely to fall in line with the 22% year over year figure. But hello, 22% decline is nothing to sneeze at! Again, it’s a collapse of historic proportions.
Can you see how the collapse of the credit bubble is rippling through the economy? Subprime to homebuilders, to banks, to sales, to exports, and now to commercial construction…
Will it be a short term blip? Are consumers now out of debt and able to borrow ever increasing amounts against their homes? Are their wages going up? Sorry, but I think it’s more than just a short term blip.
Let’s take a look at the financing that underpins commercial construction… below is a chart showing the percentage of non-performing commercial loans. Note the angle of rise is much steeper than the 2000-2003 recession and that this indicator tends to peak AFTER the recession has been declared over:
Also look at the Commercial net loan charge-offs… that’s quite the increase, is it done or is it going to peak above the previous peaks? Look at the rate of increase:
And finally, look at the number of employees in construction of all types… That’s the really painful part for thousands of Americans:
So, the ripple effect continues across commercial construction and that is seen in non-performing loans and charge-offs. Does that mean that we are nearing an end to the recession? That may be what the sheeple and markets are betting on, but this, I believe, will prove to not be an ordinary recession. Never ending growth is NOT coming back anytime soon, and certainly not REAL growth. Monetary growth maybe, but that will not be sustainable as wages will not be there to reinforce an inflationary spiral, at least not now while the debt is overhanging every government entity and the majority of Americans as well.
As the following chart shows, construction wages are not feeding inflation in anything:
While the boys on Wallstreet are marking their toxic waste to fantasy, the real economy is still suffering down on Mainstreet.
Bob Seger – Mainstreet: