Thursday, December 1, 2016

Significant Drop in Health Facilities Construction in October

Construction of health facilities slowed in October, while other construction increased a little. Overall, health facilities construction starts declined 3.1 percent, versus an increase of 0.7 percent for other construction. Health facilities construction accounted for almost 6 percent of non-residential construction starts. However, while both private and public health facilities construction both declined, there was divergence between private and public non-health construction.

(See Table I below the fold.)

Construction of private health facilities dropped 3.3 percent, versus a drop of 2.1 percent for public health facilities. Private health facilities construction starts accounted for almost 8 percent of private nonresidential construction starts. 

Construction of private non-health facilities declined by 2.0 percent, while construction of public non-health facilities increased 2.9 percent. It looks like the government has finally pulled back spending on public and VA hospitals.

For the twelve months ending last October, there was a significant difference in trend between private and public construction. Non-health private construction increased 4.8 percent, but private health facilities construction only 2.2 percent. On the other hand, non-health facilities public construction dropped 0.7 percent, but public health facilities construction increased by 0.6 percent.

Overall, health construction rose 1.9 percent, versus an increase of 3.4 percent for non-health construction. This suggests investors are nervous about future revenue growth in hospitals and other facilities.

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