Article source: ConstructConnect

There are two major questions overhanging the economies of the U.S. and Canada. (1) Will a re-emergence of coronavirus infections, mainly among the unvaccinated and tied to the Delta variant of the disease, force a slowdown in what was proving to be exceptional gross domestic product (GDP) growth? And (2), the subject of this article, will rapid price increases compel the Federal Reserve and the Bank of Canada to move more aggressively on interest rates?

In June, the All-items Consumer Price Index (CPI-U) in the U.S. moved up to +5.4% year over year from +5.0% in May. What’s known as ‘headline’ inflation in America is now increasing at its fastest rate in more than a decade. The ‘core’ rate of inflation, which omits volatile energy and food components, has increased to +4.5% y/y from the previous period’s +3.8%.

In Canada, headline inflation downshifted to +3.1% y/y in June from +3.6% y/y in May and, leaving out food and energy, it eased to +2.2% y/y from +2.4% y/y.

The problem in assessing what the Fed and the BoC might do with interest rates, however, is that they focus on different measures of inflation than the rest of us. The Fed closely monitors prices tied to Personal Consumption Expenditures (PCE) in the National Accounts, and that measure is currently restrained at only +3.4% y/y for May. (The reporting period for the PCE measure always trails the CPI by a month.)

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Article source: ConstructConnect

Texas is in a League of its Own

Through the first half of 2021, the monthly average of seasonally adjusted and annualized (SAAR) housing starts in the U.S. has been +23.2% compared with January-June 2020. The one-quarter increase in groundbreakings warrants the ‘mini-boom’ description being applied to the U.S. homebuilding market.

After climbing steadily through most of the second-half months of last year, the monthly figure has leveled off since December 2020. Furthermore, ‘permits’ which were leading ‘starts’ higher through much of 2020, have more recently descended from their peak in an apparent withdrawal to ‘base camp’ (see Graph 6).

Article source: ConstructConnect

Article source: ConstructConnect

This article focuses on the latest U.S. building material cost increases as laid out in the Producer Price Index data set compiled and published by the Bureau of Labor Statistics.

The PPI series measures prices for goods as they leave the factory gate. They’re not necessarily as up-to-the-minute relevant as some other measures. For example, there have been sighs of relief in the marketplace because of recent perceived price softening in the forestry sector. The moderation relates to transactions on commodity exchanges covering ‘spot’ and ‘futures’ prices.

Therefore, some easing may be imminent, and again especially relating to lumber and its byproducts, but there are still numerous cost hikes among other construction material inputs to raise an eyebrow or two.

Prices for steel, aluminum, and copper products, along with gasoline and diesel fuel, have all been climbing significantly higher, to some extent under the cover of the more attention-grabbing advances in forestry products.

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Article source: ConstructConnect

In June, Canada added nearly a quarter of a million net new jobs, according to the Labour Force Survey report assembled and published by Statistics Canada. The +231,000 increase, however, was not comprised of a usual mix of gains in both full-time and part-time work. Rather, full-time employment shrank by -33,000 jobs while part-time endeavors took off to the tune of +263,000 positions.

Total employment in Canada is now +8.1% year over year, with full-time work at +6.0% and part-time work at +18.0%.

The boost in part-time work has come from an uptick in the ‘accommodation and food services’ sector, where employment is now +16.8% year over year, and it has benefitted younger workers. Employment among individuals aged 15 to 24 is now +25.5% year over year.

Canada’s jobs recovery ratio, versus the scary plunge from February to April of last year, has improved to 88.6%. In services, the jobs claw-back ratio has climbed above 90%. In the public or government sector, whatever job losses there were in the Spring of last year have been retrieved and then some.

Canada’s seasonally adjusted (SA) unemployment rate now sits at 7.8%, down from 8.2% in May. The nation’s not seasonally adjusted (NSA) U rate, though, is a tight 6.0% when adjusted to the same methodological standards as are adopted in the U.S. A 6.0% NSA U rate for Canada is almost an exact match for the comparable U.S. figure of 6.1%.
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Article source: ConstructConnect