Article source: ConstructConnect

The current year, 2022, is shaping up to be the best ever for mega project initiations. ‘Megas’ are projects carrying an estimated construction value of a billion dollars or more each. For many of these projects, there’s also a machinery and equipment component in the total capital spending or investment figure that is often roughly equivalent to the construction cost.

In ConstructConnect’s ‘starts’ statistics, through October of this year, there are 25 mega project starts for a combined dollar value of $83.8 billion. 2019 was the previous best period, when there were 35 megas through the full year, adding to $79.1 billion.

A key factor inspiring owners to proceed with many of the nation’s largest construction projects is the opportunity for export sales. This is particularly true in the sphere of natural resources. To go a step further, while those opportunities exist in some other areas, such as agriculture (with the building of immense soybean processing plants, as just one example), they have especially come to the fore in the field of energy products.

Due to hydraulic fracturing, the U.S. is no longer as dependent on the rest of the world for oil and natural gas as it once way. In fact, the U.S. is back in the game of exporting energy products.

Deprived of Russian energy supplies, as a fallout of the Ukraine conflict, Europe is desperate for oil and gas from alternative suppliers. A huge differential in price has opened between natural gas extracted in North America, at around $6 USD per mcf (or MMBtu), and deliveries made to Europe, or Asia for that matter, beginning at $30 USD/mcf and going skyward from there.

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Article source: ConstructConnect

The U.S. and Canadian central banks are determined to slow their economies enough through interest rate hikes to put a choke hold on inflation (which, by the way, is showing signs of relenting in both countries). The ‘slowing of the economy’ part of the plan is worrisome because it might bring on recessions of who knows what duration or magnitude.

Since the beachheads of recession north and south of the border will almost certainly be established in residential real estate markets, this edition of the Nuggets report will concentrate nearly exclusively on the latest home building statistics for the U.S. and Canada.

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Article source: ConstructConnect

ConstructConnect’s annual construction starts statistics for ‘bricks and mortar’ retail sites are set out in Graph 1. The history goes back to 2005 and the forecast portion of the chart extends to 2026.

Under intense pressure from a rapid expansion of Internet online selling sites, physical retail construction starts contracted dramatically from 2016 through 2020. Then something interesting happened.

In 2020, with the arrival on the scene of the coronavirus, and most consumers following stay-at-home directives, there was a proliferation in purchases sought out and finalized by digital means. (As a sidebar, non-store retail sales have now tripled as a share of total retail over the past 20 years, going from 6% to 18%.)

But 2020 was also the year in which bricks and mortar retail construction starts stopped falling. In 2021, they picked up slightly and in 2022, they are looking to provide another incremental increase.

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Article source: ConstructConnect

A month ago, the Employment Situation report from the Bureau of Labor Statistics (BLS) reported a U.S. total jobs-count increase during September of +263,000. Now, for the month of October, a nearly identical change in total employment has been estimated by the BLS, +261,000 jobs. (By the way, September’s figure has just been revised to +315,000.)

These are strange times indeed. The Federal Reserve isn’t being shy about its intentions. Using the blunt instrument of interest rates, it intends to bring the economy to the edge (or beyond) of recession, to put a stop to too-rapid price inflation.

So far, the impact on the U.S. labor market has been minimal. The most recent initial jobless claims number, for the week ending October 29, stayed exceptionally low at 217,000. The seasonally adjusted (SA) unemployment rate currently sits at 3.7%; the not seasonally adjusted (NSA) U rate at 3.4%. Both levels indicate a demand for workers well in excess of supply.

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Article source: ConstructConnect

North America’s major stock markets sailed through the latest October in fine fettle. October historically has been the month when some of the biggest stock market disasters have occurred. There was the infamous Crash of 1929 and Black Monday of 1987.

But this time around, it was smooth sailing. And that was despite statements by the Federal Reserve that further interest rate hikes are in the offing. In fact, today, November 2, a further 75 basis point bump in the federal funds rate is almost guaranteed (where 100 basis points = 1.00%).

The Federal Open Market Committee (FOMC) is meeting as this article is being written and it has another session scheduled this year for December 13-14. The top of the range for the federal funds rate will soon be 4.00%. The key question concerns how much further it will be lifted.

Article source: ConstructConnect

After a gloomy patch in late summer and early fall, dominated by discussion of inflation and recession, the economic and construction news is beginning to lighten a bit. The first ray of sunshine has come in the 2022 third quarter ‘advance estimate’ GDP report. Rather than retreating or standing still, Q3 ‘real’ gross domestic product advanced by +2.6% seasonally adjusted and annualized, improving nicely on the -0.6% and -1.6% performances of Q2 and Q1 respectively.

It’s also interesting to note the BEA’s upbeat revisions to the 2021 and 2020 year-over-year annual results. 2021’s gain was moved up a little to +5.9% from an earlier estimated +5.7% and 2020’s decline was reduced to -2.8%, as opposed to -3.4%. The -2.8% showing in 2020 was a remarkable achievement, given the coronavirus-generated chaos in the first half of the year. According to the revised estimate of GDP change in 2020 (at -2.8% y/y), it wasn’t much worse than the -2.6% that occurred in 2009 (see Graph 1).

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