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Archive for May, 2019

7 Best and 7 Worst U.S. States for Y/Y and Q/Q GDP Growth

Thursday, May 30th, 2019

Article source: ConstructConnect

Table 1 sets out the latest published year-over-year and quarter-to-quarter ‘real’ (i.e., adjusted for inflation) gross domestic product (GDP) growth rates for the 50 U.S. states, plus District of Columbia. The data is made available by the Bureau of Economic Analysis (BEA).

7 Best and 7 Worst U.S. States for Y/Y and Q/Q GDP Growth Graphic

The year-over-year comparisons on the left-hand side of Table 1 are based on 2018 versus 2017 results. The quarter-to-quarter comparisons on the right-hand side of the table are for Q4 2018 versus Q3 2018. The q/q percentage changes are compounded to the power of four, making them equivalent to annual growth rates. (The ‘real’ dollar volumes underlying the q/q percent change calculations have been seasonally adjusted.)

7 State GDP Growth Headliners

Above the first bold horizontal line in Table 1 are the 15 states that have performed best either year-over-year or quarter-to-quarter. Washington recorded the strongest GDP growth y/y, at +5.7%, while Texas ranked number one for q/q gain, at +6.6%.

Seven states were in the Top 15 for both y/y and q/q GDP growth rates. Those seven appear in green shading. They are: Washington, Idaho, Arizona, California, Colorado, Nevada, and Texas.

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Signs of Consumer Fatigue in U.S. and Canadian Retail Sales

Tuesday, May 28th, 2019

Article source: ConstructConnect

An ‘Overhang’ of Space in ‘Bricks and Mortar’ Retail

With jobs growth so strong and incomes rising, a main driving force behind the ten-year expansion in U.S. gross domestic product (GDP) has been consumer spending. Retail sales as a key component of consumer spending, however, have been taking quite a different path than in the past. Physical shopping outlets have been closing at a truly alarming rate, to be replaced by warehouses to fulfill purchases made over the Internet.

Signs of Consumer Fatigue in U.S. and Canadian Retail Sales Graphic

The construction industry welcomes the proliferation of distribution centers but laments the loss of ‘bricks and mortar’ retail building activity. Moreover, it’s not just the pullback in the square footage of retail space that is disappointing for construction. Just as big a problem is the ‘overhang’.

Vast amounts of empty space have been accumulating that will require years of gradually increasing occupancy to fill back up again.

U.S. Retail and Food Services Sales

When the 2008-09 recession was at its worst, U.S. total retail sales nosedived by nearly -13.0% year over year. As Graph 1 shows, U.S. retail sales then recovered in 2010 and 2011 to between +5% and +10% y/y. For the most recent seven-plus years, they’ve been mainly between 0% and +5%.

An often-quoted target for y/y ‘current dollar’ retail sales is +5%. After ‘normal’ inflation is factored out, +5% becomes +3% in ‘real’ terms, which provides healthy backing for GDP advancement.

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8 Mid-May Economic Nuggets

Monday, May 20th, 2019

Article source: ConstructConnect

Inflation, Stock Markets and Interest Rates

Mid-May Economic Nuggets Graphic

The U.S. ‘all-items’ Consumer Price Index (CPI) in April was +2.0% year over year. The ‘core’ rate of inflation, which omits mainly food and energy items that display notable price volatility, was +2.1% y/y. It seems that inflation, at least for now, has become untethered from what is transpiring in the economy at large. A highly-charged jobs market and solid gross domestic product (GDP) growth aren’t causing the usual (i.e., pre-recession) ascending price effect.

Technological advances by leading firms in many industries have helped to keep price increases retrained. Examples include Amazon in retail; Uber in ride-sharing; and iPhones in photography.

The big economic issue at present is the escalation of America’s trade dispute with China. The major stock market indices, which were recovering nicely from setbacks in December, have lately been wobbling once again. Investors had the impression that a trade deal was imminent.

The Federal Reserve has come under criticism for paying more attention to the stock markets than the ‘real economy’ when setting its interest rate policy. Since inflation has been taken out of the equation, it will be interesting to observe what will prompt the next Fed interest rate move.

With the foregoing as backdrop, there are also the following nuggets to be gleaned from the latest public and private agency data releases. The soil is fertile and the crop abundant.

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Explosive Jobs Growth in Canada’s April Labour Force Report

Tuesday, May 14th, 2019

Article source: ConstructConnect

Canadian total employment shot up by +106,000 jobs in April, and the nation’s unemployment rate declined to 5.7%, according to the latest Labour Force Survey findings from Statistics Canada.

Explosive Jobs Growth in Canada’s April Labour Force Report Graphic

March’s jobless rate had been 5.8%. The month-to-month improvement in the out-of-work proportion would have been greater if not for the fact that the ‘participation rate’ climbed from 65.7% to 65.9% between the third and fourth months of this year. (A higher participation rate means that more people are actively on the hunt for jobs.)

The average monthly gain in total employment in Canada through the first third of 2019 has been +55,000, a robust hike. From January to April of last year, the average monthly change in the total Canadian jobs count was -2,000.

Since April 2018, total employment in Canada has risen by +426,000 jobs, a notable achievement.

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U.S. Put-in-place Construction Spending Hits a Soft Spot

Monday, May 13th, 2019

Article source: ConstructConnect

Total U.S. put-in-place construction spending, after increasing steadily (although slowly) for seven years, from 2011 through 2017, has lost upwards momentum over the past year and a bit. The cause of the overall weakness has been a retreating residential sector. Nonresidential has continued to exhibit a decent degree of uplift.

U.S. Total Put-in-place Construction Spending Graphic

For various type-of-structure categories of construction, the charts in this article showcase three data sets – (1) seasonally adjusted (SA) monthly ‘current’ dollar volume levels (where ‘current’ means not adjusted for inflation); (2) month-to-month percent changes in the dollar volume; and (3) year-over-year percent changes in the dollar volume.

As shown in Graph 1 below, total spending on U.S. construction reached its zenith in May of last year, at $1.324 trillion. Since that peak, it has fallen by 3.2%, to land at $1.282 trillion in the latest month for which data is available, March 2019.

The average of month-to-month percent changes for total U.S. put-in-place construction spending during the past ten years has been +0.4%. In March 2019, the month-over-month figure was in negative territory, at -0.9%.

Over the past 10 years, the average of year-over-year percent changes recorded each month for total put-in-place construction has been +4.2%. In March 2019, the year-over-year change was -0.8%.

The ‘glory days’ for U.S. put-in-place construction have, for the moment at least, receded.

Total put-in-place construction was doing its best between 2012 and early 2017, when the y/y percent change curve was consistently above the 10-year average line, as seen in the lower portion of Graph 1. Recently, U.S. put-in-place construction has fallen off its earlier faster pace.

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U.S. Labor Market Strength Continued to Impress in April

Tuesday, May 7th, 2019

Article source: ConstructConnect

President Trump will be of two minds when he sees the latest labor market numbers from the Bureau of Labor Statistics (BLS). April’s Employment Situation report records another month of exceptional jobs growth, +263,000, and a notable decline in the unemployment rate to only 3.6%, which is as low as that metric has been in half a century. Furthermore, 3.6% was the seasonally adjusted (SA) rate. The not seasonally adjusted (NSA) jobless level was even tighter, at 3.3%.

U.S. Labor Market Strength Graphic

But the good news with respect to jobs means that there is now even less likelihood that the Chairman of the Federal Reserve, Jerome Powell, will pay heed to the President’s advice to lower interest rates. The needle on the central bank’s ‘yield meter’ has undoubtedly swung away from mildly dovish towards perhaps hawkish once again.

Through the first one-third of 2019, America’s monthly average (net) jobs creation has been +205,000, a quite solid level of increase. But placing it in perspective, it’s still -6.7% compared with January-to-April 2018’s comparable figure of +220,000.

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Prolonged Streak of U.S. Beating Canada in Q/Q GDP Growth

Friday, May 3rd, 2019

Article source: ConstructConnect

Explanation of Quarterly and Annual GDP Percent Change Calculations

The mathematics employed to calculate ‘real’ gross domestic product (GDP) levels and rates of change are more convoluted than one might suppose. For a new quarter, GDP line items (e.g., consumption, investment, government spending and exports/imports), after removing the effects of inflation, are added up and adjusted for seasonality. They are also expressed as if they are annual results – i.e., the quarterly figures are ‘blown up’ to a corresponding annual level.

U.S. Beating Canada in Q/Q GDP Growth Graphic

The ‘official’ GDP figure for any year is the average of the levels for the four quarters within that year and the year-to-year growth rate is the percentage change between annual averages.

The figure most often quoted by the press, however, is a quarter-to-quarter GDP growth rate annualized. Such a number compares latest-quarter GDP with previous-quarter GDP to derive a percentage change. Then that percentage change is compounded to the power of four (i.e., ‘annualized’) to account for four quarters in a year.

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