Ken Simonson, chief economist of the Associated General Contractors of America reports grim news in his newsletter:

The value of nonresidential building starts plummeted 31% in July, compared to July 2007, according to data privately compiled by Reed Construction Data and released today. In the first seven months of 2008 combined, year-to-date (YTD) starts fell 7% in dollar terms and 15% in square footage. Spending on civil works climbed 8% in July but fell 4% YTD. Among the largest categories as classified by Reed, spending on schools/colleges fell 7% for the month and was unchanged YTD; roads/highways dropped 17% and 6%; retail plunged 24% for the month and YTD; water/sewage rose 7% and 3%; office fell 15% and 13%; and hospitals/clinics fell 26% for the month but rose 5% YTD.

The outlook for retail construction continues to darken. Chains generally reported declines or feeble growth in sales in July compared to a year ago in stores that were open in both periods. More chains have trimmed expansion plans, closed stores or gone out of business, adding to the supply of vacant space. The Wall Street Journal reported in separate stories last week that “Office Depot is…whittling the number of new stores this year down to 66 from 75 and cutting nearly all remodeling for existing stores” and “Parent companies of [Bennigan’s and Steak and Ale restaurants] filed for Chapter 7 bankruptcy last week, moves that are expected to close 159 company-operated Bennigan’s restaurants and all 49 Steak and Ale locations.” The International Council of Shopping Centers estimated that “Some 144,000 stores will close this year, up 7% from last year,” the Journal reported on July 16. On July 11, the paper reported “Walgreen Co., which has made rapid U.S. expansion a cornerstone of its strategy, unexpectedly said…it will slow its long-term rate of store openings….It expects to increases its stores by about…495 net new stores [after figuring in relocations and closings], during the fiscal year beginning September 1, 2008. But in the following fiscal year, Walgreen will reduce its rate of growth to…425 net new stores. The target slows further the next year, to…365 net new stores.”

In another ominous sign for projects that depend on bank financing, the Journal reported on July 23, “Data cruncher Foresight Analytics LLC…estimates that construction-loan delinquencies among all property types reached 9% in the [second] quarte,r up from 7.2% in the first quarter and 2.4% in the year-earlier period…. Matthew Anderson, partner at Foresight Analytics, says that an early read on the data shows the pain is spreading to nonresidential projects. He says the weakening economy has put pressure on developers of shopping malls, for instance.”

Futures prices for many commodities have executed an abrupt U-turn, as has diesel fuel, but many construction materials costs continue to climb. “Crude oil for September delivery fell 75 cents…to settle at $114.45 a barrel at 2:50 p.m. on the New York Mercantile Exchange, the lowest close since May 1,” Bloomberg News reported this afternoon. “Prices are up 60 percent from a year ago” but down more than 20% from the record set in mid-July. Copper futures closed at a six-month low of $3.31, down 19% from the record of $4.08 set on July 2. Natural-gas futures closed up today but down 35% from the peak of mid-July. The national average price of on-highway diesel fuel dropped for the fourth straight week, by 15 cents per gallon to $4.35, the Energy Information Administration reported this evening. Today’s price was 41 cents below the record set on July 14 but $1.51 (53%) higher than a year ago.

But in the past week, contractors have forwarded letters from suppliers announcing a variety of price increases. Makers of gypsum products, such as wallboard, announced 10-12% increases, effective today, with equal increases in mid-September and mid-October. A supplier of roofing products announced increases of 10-20%, effective today. Suppliers of vinyl siding and other building coverings announced a 20% increase, later rolled back to 10%. A glass supplier said it was “compelled to issue an 8% price increase, effective September 1 on all product lines.” Two ready-mix concrete suppliers announced they would raise prices $25 per cubic yard, effective September 1 or October 1, but freeze prices through 2009 and eliminate fuel surcharges. Several companies listed higher delivery charges. A survey released on Tuesday by the Institute for Supply Management listed these items of interest to construction that nonmanufacturing purchasing managers said rose in price in July: building materials, carbon pipe, diesel fuel and fuel surcharges, petroleum-based products, plumbing supplies, and steel products. No relevant items were down in price. Carbon pipe was also listed as being in short supply. There have also been numerous reports of shortages of liquid asphalt and polymers that are blended with it.