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ConstructConnect’s February 2018 Starts -8.4% Versus Prior Five-Year Average

Monday, March 19th, 2018

Article source: ConstructConnect

ConstructConnect announced today that February’s volume of construction starts, excluding residential activity, was $23.6 billion. The latest month-to-month change in the volume of starts, at -24.3%, was more than the usual mild drop from January to February due to seasonality.


February of this year relative to February of last year was -35.5%. The level of starts in February 2017, however, was unusually high, $36.6 billion. Comparing February of this year with the average for February in the preceding five years (2013 to 2017), the change was -8.4%. February of this year versus the average for the four years 2013 to 2016 (i.e., omitting 2017) was +2.4%.

Year-to-date nonresidential starts in 2018 have been -26.4% versus January-February of 2017. The first-two-months of this year versus the comparable period in 2016 was a less severe slide of -3.2%.

The starts figures throughout this report are not seasonally adjusted (NSA). Nor are they altered for inflation. They are expressed in what are termed ‘current’ as opposed to ‘constant’ dollars.

View this information as an infographic

‘Nonresidential building’ plus ‘engineering/civil’ work accounts for a larger share of total construction than residential activity. The former’s combined proportion of total put-in-place construction in the Census Bureau’s January report was 60%; the latter’s share was 40%.

ConstructConnect’s construction starts are leading indicators for the Census Bureau’s capital investment or put-in-place series. Also, the reporting period for starts (i.e., February 2018) is one month ahead of the reporting period for the investment series (i.e., January 2018.)

Over the past four months, jobs growth in construction has been surging. From November 2017 through January 2018, the month-to-month employment pickups were +42,000, +42,000 and +40,000 respectively. February’s result was a further quickening of the pace, +61,000. The combined four-month gain in construction hiring has been +185,000 jobs. The last time there was such a substantial four-month increase was from January to April 2006, +193,000. In 2006, though, there was a homebuilding boom, fueled by subprime mortgages, that turned into a bust.

Total construction employment is still half a million jobs below its prior peak in 2007, before the onset of the Great Recession. That gap will likely be eliminated quickly. According to the latest Employment Situation report from the Bureau of Labor Statistics (BLS), the U.S. construction sector is generating jobs at a year-over-year rate (+3.7%) that is more than twice as fast as for all workers in the economy (+1.6%). The unemployment rate in the sector in the latest February was 7.8%. Twelve months ago, it had been 8.8%. The jobless figure is traditionally worse in winter.

The Employment Situation report also includes jobs results for three other sectors with close ties to construction. Employment with ‘real estate’ offices in February was +1.7% year over year; with ‘building material and garden supply stores’, +3.9%; and with ‘architectural and engineering services’ firms, +3.3%. Since designers must provide assembly instructions before projects can proceed, their +3.3% staffing increase suggests ongoing healthy construction activity.

Construction Material Costs – Latest PPI, IPPI and RMPI Results, U.S. and Canada

Friday, March 2nd, 2018

Article source: ConstructConnect

When assessing building material cost changes, the primary source for the U.S. is the Producer Price Index (PPI) data series calculated by the Bureau of Labor Statistics (BLS). (The BLS is also responsible for the Consumer Price Index.)


For Canada, one turns to the Industrial Product Price Index (IPPI) and Raw Materials Price Index (RMPI) data series from Statistics Canada.

While the history of the latest PPI numbers (Table 1) extends to January 2018, the IPPI and RMPI figures (Table 2) are currently available only through December 2017.

The PPI results include specific findings for ‘final demand construction’ (i.e., overall construction) as well as private capital versus government investment, plus five specific type-of-structure sub-categories.


Ten Mid-February Economic Nuggets – With a Focus on Inflation Fears

Thursday, March 1st, 2018

Article source: ConstructConnect

At the beginning of February, there was a great deal of volatility in the U.S. major stock market indices. They fell into ‘correction’ territory, which in ‘market-talk’ means they dropped by 10% from their peaks, before steadying and heading cautiously upwards again.

Ten Mid-February Economic Nuggets Graphic

Some of the initial downward movement was due to profit-taking, on the heels of years of exceptional equity price gains. As the retreat grew more severe, however, it became harder to explain, especially since the recently passed tax cuts will provide an extra boost to corporate bottom lines.

A consensus explanation gradually emerged and it goes as follows. Yes, the economy is growing rapidly and job creation is outstanding. But maybe output growth and labor market conditions are too good. The level of unemployment has dropped near a historical low. Can wage restraint hold? Furthermore, there is a synchronous world expansion underway and commodities demand is heating up. Prices for key raw materials are climbing once again.

All these developments have the potential to light a fire under inflation. And if inflation is on the rise, the Federal Reserve may feel the need to initiate ‘cooling’ interest rate hikes faster than earlier anticipated. Some economic forecasting firms are already projecting there will be four, not three, interest rate increases this year.

Therefore, perhaps the hottest topic for discussion throughout 2018 will be how inflation is performing. Specifically, is the ‘Consumer Price Index for All Urban Consumers (CPI-U)’ busting free from its +2.0% (year over year) bondage and raising more havoc?


U.S. Put-in-Place Construction Spending Forecasts – Heading Into Winter 2017

Wednesday, December 13th, 2017

Article source: ConstructConnect

ConstructConnect is known for its ‘starts’ statistics and forecasts. Twice per year, however, − in early summer and late fall − ConstructConnect also calculates and publishes ‘put-in-place’ construction spending projections.


It helps that the ‘starts’ numbers are leading indicators for the PIP figures.

The history of PIP capital spending is compiled and published by the Census Bureau. A thorough explanation of the differences between ‘starts’ and ‘put-in-place’ is provided at the end of this article.

ConstructConnect is now estimating that ‘grand total’ U.S. put-in-place construction spending in 2017, expressed in ‘current’-dollar terms (i.e., not adjusted for inflation), will be $1.233 trillion.

Stock Market Prices Playing Sidekick Role in a ‘Buddy Movie’

Monday, November 13th, 2017

Article source: ConstructConnect

As shown in Graphs 1, 2 and 3, the most widely known and discussed U.S. stock market indices – Dow Jones Industrial (DJI), S&P 500 and NASDAQ – all set new record highs in July.

On a year-over-year basis, the DJI at the close of last month was +18.8%; the S&P 500 was +13.6%; and NASDAQ especially stood out with a gain of +23.0%.

Just as remarkable have been the improvements in those three indices relative to their prior peaks.

Since its previous summit in October 2007 (13,930), the DJI is +57.2%.

Since October 2007 (1,549), the S&P 500 is +59.5%.

Also since October 2007 (2,859), when it managed a mini-peak, NASDAQ is presently +122.0%. NASDAQ is even up substantially (+35.2%) relative to its ‘Mt. Everest’ of peaks in February 2000 (4,696), when the ‘ boom’ was in full swing.


Ranking the Economic Performance of Canada’s Provinces – Heat Graph

Monday, November 6th, 2017

Article source: ConstructConnect

Chart 1 of this article sets out, for each of Canada’s provinces, the most recent year-over-year growth rates for seven demographic and economic variables – population, housing starts, total jobs, hourly earnings, weekly earnings, retail sales and export sales.

An eighth measure is also included, the unemployment rate, but it is a ‘level’ rather than a growth rate.

To compare how the provinces are doing relative to each other, Chart 2 rearranges the results from Chart 1 in a ‘heat’ graphic. The methodology is as follows.

In each column of Chart 1, when the percent change number is equal to or higher than the Canada-wide figure, the relevant ‘cell’ is highlighted in yellow (for ‘warm’).


Seven Surefire U.S. Job Creators

Thursday, October 26th, 2017

Article source: ConstructConnect

The U.S. total employment increase since the Great Recession has been quite strong. Most type-of-job categories have bounced back with remarkable resiliency.


There are seven areas within the economy, however, where the jobs improvement has gone well beyond most others. Their employment levels have displayed almost nothing but ascending progressions.

They even moved through 2008-09’s Big Dip relatively unscathed.

Due to their upbeat story, I thought it would be fun to put the seven on display in this article.

Few of the seven will come as a surprise. Most have already received much media attention.


13 Mid-September Economic Nuggets

Monday, October 23rd, 2017

Article source: ConstructConnect

Hurricane Harvey, which first struck southern Texas on Saturday August 25, and Hurricane Irma, which reached landfall in the Florida Keys on Sunday September 10, will ‘muddy’ the economic statistics for months to come. Estimates of the physical damage range widely, with $200 billion as the current outer limit.

Homes, shopping malls, schools, churches, fast-food outlets, abandoned motor vehicles and fragile vegetation were all victimized, to varying degrees, by storm surges, flooding and crushing winds. In the aftermath, restoring power and ensuring the safety of roads and bridges have been the immediate concerns.

Many building material suppliers and contractors, working together with insurance companies and government relief bodies, will be immersed in lengthy rebuilding efforts. The labor availability problem will become more acute.


Chief Economist Alex Carrick Shares Outlook on 2018

Thursday, October 19th, 2017

Article source: ConstructConnect

Employment and revenues for architecture, engineering and construction have grown modestly for most of 2017. But the signals for the next 12 months are mixed, with architectural billings positive, construction starts uneven and contractors hiring, but worried about finding enough qualified workers. Meanwhile, there is huge uncertainty about the impact of potential changes in tax, infrastructure, immigration and other types of policy. How will these cross-cutting influences play out?

On November 1, three of the industry’s leading economists will come together for the annual Design and Construction Industry Economic Forecast, where they’ll discuss the changing landscape of commercial construction, the opportunities and challenges facing the industry as well as strategic insight on industry trends.

Construct Connect recently spoke to Alex Carrick, Chief Economists for ConstructConnect, for a quick discussion about his thoughts on the current state of the construction industry and where things are heading.

ConstructConnect: How long have you been hosting this webcast, what’s it about and who should attend?


2 Leading Monitors of U.S. Construction Activity, 1 Public and 1 Private – Early Fall 2017

Monday, October 16th, 2017

Article source: ConstructConnect

The percentage levels and changes in Table 1 are based on the Census Bureau’s seasonally-adjusted (SA) August 2017 and earlier put-in-place construction statistics. ‘Put-in-place’ as a concept is meant to mirror work-in-process or progress payments as projects proceed.


For each type-of-structure, Table 1 takes the behind-the-scenes put-in-place data and compares the percentage changes of latest-12-months-over-previous-12-months versus latest-three-months-over-previous-three-months (annualized).

If the three-month percent change exceeds the 12-month percent change, then construction activity in that type-of-structure category is considered to be speeding up. A check mark is entered in the far right column. (If the opposite is occurring, a check mark is entered in the ‘slowing down’ column.)

If a type-of-structure category has a latest 3-month percent-change that is negative, but less negative, than its 12-month percent-change, such a circumstance is also considered to be an instance of ‘speeding up’ and warrants a check mark in the right-hand column. (Or, if it’s turning more negative, then it’s ‘slowing down’ further.)

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