Article source: ConstructConnect

As with most things pandemic-related, it’s hard to know where the cost of construction will land six months, or a year, or two years from now. Set out below are ten ways in which costing in the sector is likely to be impacted in the period ahead.

A Commodities Dependency for Materials:

(1) Commodities are the basic building blocks of everything, including materials used in construction. As an asset class, they will stay undervalued until the global economy picks up a great deal more steam than it is currently exhibiting. Over the past two decades, China has embarked on several massive infrastructure spending programs that have drawn in nearly half of world copper, nickel, iron ore (for steel), aluminum and cement/concrete supplies.

To kick-start its economy again, after a coronavirus-induced shutdown early this year, China has announced it will initiate another round of infrastructure spending. This time, though, most of the focus won’t be on building roads, transit projects, railways and airports. Instead, majority funding will go towards boosting the high-tech sectors expected to lead future gross domestic product growth. The emphasis will be on data centers, biotechnology and medical labs, etc.

The uplift in demand for and pricing of commodities from old-style infrastructure projects is well known. New-style infrastructure spending will shift the balance towards other inputs (e.g., lithium, cobalt, etc.), blunting ‘normal’ commodity price movements.

(2) A U.S. economic upturn, especially if residential construction is a primary driver, will have a significant impact in a couple of commodity pricing areas, primarily lumber and gypsum.

(more…)

Lines That Sink, Bob Back up and Soar

Article source: ConstructConnect

There are some eye-catching results to be observed from the Census Bureau’s Advance Monthly Sales for Retail and Food Services, May 2020 report. After shopkeepers posted terrible results in April, there were some astonishing bounce-backs in May.

The following seven graphs mainly speak for themselves. There are lines that plummet severely and stay depressed. But there are also lines that sink sharply, then soar again. And in at least one instance, for nonstore retailers, there’s a curve that shoots directly upwards in a manner almost never seen anywhere else before.

U.S. total retail sales in May were +16.8% month to month, leaving them only -1.4% year over year. Much of the thanks for the m/m improvement goes to ‘motor vehicle and parts’ sales, which were +44.1% m/m, but still negative to the tune of -3.9% y/y. Auto sector sales accounted for the largest share of ‘total retail’ in May, at 22.1%.

(more…)

• As compiled by ConstructConnect, the dollar volumes of construction ‘starts’ year to date in Canada so far this year, versus their levels in January-May 2019, have been as follows: ‘grand total’, -33%; residential, -34%; nonresidential building, -41%; and heavy engineering/civil, -23%. Provincially, the steepest declines have occurred in Quebec (where the coronavirus has struck hardest), -54%, and Alberta (where the energy sector has been under siege, although oil prices have now recovered above $30 USD per barrel), -44%. The comparable year-to-date U.S. starts statistics, which are published in the Industry Snapshot, have been: ‘grand total’, -20%; residential, -11%; nonresidential building, -33%; and heavy engineering/civil, -7%.

• With re-openings underway, workers returning to some locations are being met with: (1) temperature screenings; (2) hand sanitizer stations at entranceways and throughout departments; (3) plexiglass partitions at reception desks; and (4) requests that they sign a liability waiver. The legal community is saying that litigation against a company if one (or several) of its employees contract the coronavirus won’t become as common as one might suppose. It will be too hard to prove where an individual picked up the disease. It could have been while walking down the street; while shopping in a grocery store; etc.

(more…)