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Health Construction Declined in January, Robust Year on Year

The construction market was weak overall in January, especially in health facilities, where construction starts declined 1.6 percent from December. Other construction starts declined only 1.0 percent. Health facilities construction accounted for just under six percent of the value of all new nonresidential construction.

Construction of private health facilities dropped 0.2 percent, versus an increase of 0.3 percent for private non-health facilities. Private health facilities construction starts accounted for over seven percent of private nonresidential construction starts. Construction of public health facilities dropped by 6.6 percent. However, construction of other public facilities dropped by 4.9 percent. In other words, the decline in health facilities construction was 0.4 percentage points worse than the change in non-health private construction, versus 1.7 percentage points worse than non-health public construction (Table I).

Drop in Health Facilities Construction Continues in November

October’s construction trend continued in November. Overall, health facilities construction starts declined 0.1 percent, versus an increase of 0.9 percent for other construction. Health facilities construction accounted for almost 6 percent of non-residential construction starts. However, there was greater gap between health and non-health starts in private than public construction.

Construction of private health facilities dropped 0.2 percent, versus an increase of 1.0 percent for private non-health facilities. Private health facilities construction starts accounted for less than 4 percent of private nonresidential construction starts. Construction of public health facilities increased by 0.4 percent, while construction of public non-health facilities increased 0.8 percent. In other words, non-health facilities construction outpaced health construction by 1.2 percentage points in the private construction market, versus only 0.4 percentage points in the public construction market.

For the twelve months ending last October, there was a significant difference in trend between private and public construction. Non-health private construction increased 4.3 percent, but private health facilities construction dropped 1.5 percent. On the other hand, non-health facilities public construction increased 2.6 percent, while public health facilities construction increased by 2.9 percent.

This suggests private investors are nervous about future revenue growth in hospitals and other facilities.

See Table I below the fold:

Significant Divergence in Private Vs. Public Health Facilities Construction in July

The divergence between private and public health facilities construction continued in July. Overall, health facilities construction starts increased 0.3 percent in July, versus zero for other construction. However, there was a significant difference between the private and public segments.

Construction of private health facilities dropped 0.3 percent, versus an increase of 1.0 percent for other private construction. Construction of public health facilities increased a whopping 2.5 percent, versus a drop of 3.2 percent for other public construction (Table I).

Is this what they mean by “infrastructure” spending – broken bridges and roads, while more VA and county hospitals spring up?

Health Facilities Exceed Other Construction in May

April’s drop in health facilities starts looks to have been idiosyncratic. Health facilities exceeded other construction in May, as in March and February. While construction overall dropped at a seasonally adjusted annual rate of 0.8 percent, health construction increased 0.2 percent (See Table I below the fold).

The difference was especially apparent in private construction. Construction of private health facilities increased 0.5 percent, 0.8 percentage points more than other private construction, which declined.  Construction of public health facilities dropped 1.0 percent, but this was less than half the drop in other public construction.

For the twelve months from May 2015, there is a significant difference in trend between private and public construction. Private construction increased 4.7 percent, and private health facilities starts increased at almost exactly the same rate. However, while public construction declined 2.6 percent, public construction of health facilities dropped only 1.4 percent.

Overall, health construction increased 3.3 percent, versus only 2.8 percent for non-health construction. Notwithstanding other factors, this indicates health costs will continue to increase faster than other sectors of the economy because (as the old saying goes) “a bed built is a bed filled.”