Article source: ConstructConnect

U.S. Economy Stumbling Blocks

A year and a half into the coronavirus health crisis, the economies of the U.S. and Canada have been running into some stumbling blocks. In the U.S., GDP growth in Q1 and Q2 of this year, at +6.3% and +6.5% respectively (quarter to quarter annualized), were looking pretty good, and not far out of line with the +7.0% forecast figure for the full year adopted by many analysts. But the third quarter has not been looking as sparky.

Shortages of components and labor have cut into production across a wide swath. With some major automakers, motor vehicle assembly lines have temporarily ceased operations because computer chips have not been arriving from China as contracted.

With major retailers, imported consumer goods are not making it to the interior of the country because of tie-ups at the ports. There’s a logjam of container ships off the coast of California.

The cost of shipping goods from overseas has risen dramatically. When firms turn to the air as an alternative means of moving cargo, they’re finding there hasn’t yet been a sufficient increase in capacity.
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Article source: ConstructConnect

Canada’s foreign trade picture brightened considerably in June. The nation’s merchandise trade balance recorded its biggest surplus since before the 2008-2009 recession. Furthermore, there have now been four surpluses in the past six months. During the decade prior to this year, Canada’s monthly goods trade balance spent a lot of time below the zero x-axis (Graph 1). (‘Merchandise’ trade is a fancier way of saying ‘goods’ as opposed to ‘services’ trade.)

Giving a huge helping hand to Canadian trade, at present, is the pickup in the world economy, which is giving a boost to commodities demand and prices. For the construction sector, there’s a crucial counterbalancing aspect to higher commodity prices. Commodities (or raw materials) are the crucial building blocks of all construction materials (e.g., copper in wiring; iron ore in structural and rebar steel). Therefore, rising resource prices will lift construction input costs.

But there’s another aspect to consider. Higher prices for their extraction output are an incentive for resource owners to undertake expansion expenditures, historically accounting for some of the largest construction projects anywhere.

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