Article source: ConstructConnect

U.S. Housing Starts Stay Elevated

Construction activity in the U.S. is currently being sustained almost exclusively by residential work. Year to date through August, the put-in-place capital spending figures from the Census Bureau show the residential dollar volume to be +25.8% compared with Jan-Aug 2020 and nonresidential to be -6.7%. The grand total is +7.0%.
The usual proportions of residential to nonresidential in the total PIP numbers are 40% to 60%. Presently, residential has increased its prominence to claim an almost equal share, at 49.5%, to nonresidential construction’s 50.5%.
Among nonresidential construction’s 16 type-of-structure sub-categories, only one has managed a year-to-date increase in spending, ‘sewage and waste disposal’, +3.6%. Furthermore, that gain is tied to the burst of new single-family homebuilding that is taking place.
Housing starts in the U.S., as the average of the monthly seasonally adjusted and annualized (SAAR) figures through August of this year, have been ahead by one-fifth (+20.3%) versus the first eight months of last year.
The monthly average of single-family starts (in units) has been +23.9%, setting a pace nearly twice as fast as multi-family starts, +12.6%.
Read the rest of The Homebuilding Juggernaut Keeps on Rolling in U.S. and Canada

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.
Read the rest of Stock Markets Speed Along, Oblivious to Blind Spots

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.

Read the rest of Canada Achieves Foreign Trade Gains; U.S. Still Sinking

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The headlines are no longer screaming about steeply climbing lumber prices. The ultra-sharp gains are over and a pullback phase has settled in.

A moderation in price was expected due to housing starts leveling off and home renovation projects being put on the back burner, as the leisure-time days of summer are replaced by the more frenetically paced days of fall.

July’s Producer Price Index (PPI) for softwood lumber, shown in Table 1, was -16.3% compared with three months ago in April. The latest month-to-month price change was -29.0%.

As Table 1 and Graph 1 set out, however, the price advances for other forestry products, and for a multitude of other inputs used in the building process, have not let up much.

Prices for plywood and particle board/OSB are both higher by double year over year and by one-third over the latest three months (which will be referred to as quarter over quarter or q/q). Month to month in July, plywood was +3% and particle board/OSB, +7%.

Steel bars, plates and structural shapes in July were +43.7% year over year, +10.5% over the latest three months and +6.0% month to month. Iron and steel scrap used in electric-arc steelmaking furnaces was +103.8% y/y, +16.3% q/q and +0.8% m/m.

Interestingly, the Consumer Price Index (CPI) for used cars and trucks, the eventual primary source of steel scrap, was also higher by an extraordinary amount in July, +41.7%.

The ‘steel pipe and tube’ PPI in July was +48.8% y/y, +16.4% q/q and +9.0% m/m.

July’s aluminum mill shapes PPI was +33.2% y/y, +6.9% q/q and +1.5% m/m.

Some of the other dramatic year over year PPI sub-category increases in July were: gasoline and diesel fuel, a little more than +80%; gypsum, +22%; insulation materials, +12%; air conditioning and heating equipment, about +10%; paints and architectural coatings, also +10%; and flat glass, +9.5%.

Read the rest of Little Letup in U.S. and Canadian Construction Material Cost Increases

Article source: ConstructConnect

The 14 graphs in this article set out how housing starts have been performing so far this year (i.e., through July) in the U.S. and Canada, nationally and by regions, states/provinces and cities. There are also looks at the single-family homebuilding market versus the multi-unit segment.

The graphs, with accompanying text boxes, are meant to stand on their own, each with a story to tell. Many of the key takeaway points, however, are set out in the ‘bullets’ below.

The key observations concerning the U.S. homebuilding marketplace are as follows.

• S. nation-wide total housing starts have been ahead by one-fifth (+20.4%) as a monthly average of seasonally adjusted and annualized (SAAR) ‘dwelling unit’ figures year to date versus the same January-to-July time frame of 2020 (Graph 1).
• Groundbreakings on single-family starts (+27.0% ytd) have been considerably better than for multi-unit properties (+6.7%) (Graph 2 and 5).
• Total starts recovered nicely after a steep drop early in the pandemic, but their climb appears to have hit a ceiling around 1.6 million units (monthly annualized), where they’ve been hovering since the end of last year (Graph 3).
• Residential ‘permits’ (accepted as a leading indicator for groundbreakings) are still running a little faster (higher) than ‘starts’, but the gap has narrowed (Graph 4).
• On a year-to-date percentage-change basis, the Northeast and West Regions have recorded stronger increases in starts (+25.5% and +25.0% respectively) than the Midwest and South (+19.2% and +17.8% respectively) (Graph 5).
• On a month-to-month basis in July, however, only the South Region recorded an increase (+2.1%). The Midwest retreated by -6.9%; the West by -11.3%; and the Northeast by a dismal -49.3%. The Northeast in July 2021 also showed exceptionally badly compared with July 2020, -44.7% (Graph 6).
• Three of the four major cities in Texas continue to be dominant among all U.S. cities in a ranking of the level (in units) of year-to-date starts. Dallas-Ft Worth is number one; Houston, number two; and Austin, in fourth position (Graph 7).
• Philadelphia leads America’s 36 most populous cities in terms of year-to-date percentage change in housing permits/starts (Graph 8).

Read the rest of U.S. Home Building Up by One-fifth; Canadian Up by Two-fifths

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Top of mind for economic analysts these days is the question of how rapidly prices (or costs, from a different perspective) are moving, and in what direction. The construction sector, mainly on the residential side, has been plagued much of this year by extraordinarily large climbs in prices for forestry products. July’s Producer Price Index (PPI) results from the Bureau of Labor Statistics (BLS) show an abatement in this problem. Softwood lumber’s July PPI was -29.0% month to month and -16.3% over the latest three months. Nevertheless, it was ahead by a mighty +45.0% year over year; but in May, it had been +154% y/y.

For some other key material inputs, though, a letup in price/cost advance remains elusive. The ‘hot rolled steel bars, plates and structural shapes’ PPI is +6.0% m/m, +10.5% over the latest three months, and +43.7% y/y. The ‘aluminum sheet and strip’ PPI is +2.3% m/m, +7.8% over the latest three months, and +41.2% y/y.

Without further ado, therefore, let’s delve into some other pricing/costing issues, plus discuss other key statistical information appearing in recent public and private sector data releases.

(1) While there were some mild pullbacks in the year-over-year U.S. inflation numbers in July, the figures stayed inordinately high. The ‘core’ subset of the ‘all items’ Consumer Price Index (CPI) eased a little to +4.3% y/y from +4.5% y/y in June. The ‘energy’ sub-index retreated to +23.8% from +24.5%. Gasoline downshifted to +41.7% from +45.1%. Nevertheless, the ‘all items’ index in July stayed the same as in the prior month at +5.4% y/y. The Federal Reserve’s target for ‘all items’ inflation, under normal circumstances, is +2.0%. A theme that is likely to keep repeating in the months ahead is that normal cyclical recovery patterns won’t necessarily apply when exiting a pandemic.

Read the rest of Ten Mid-August Economic Nuggets

As the U.S. and Canadian economies recover from horrific coronavirus-induced slides last year, it’s interesting to observe where, among cities, the pace is quickening most resoundingly.

Tables 1 and 2 present relatively easy-to-understand assessments of city labor markets.

Each table features side-by-side rankings of cities according to year-over-year number of jobs changes (from fastest to slowest) and unemployment rates (lowest or tightest to highest or most severe).

Table 1 is a condensed version of the whole data set for America’s 51 largest (by population) cities that appears at the end of this article. It has been shortened to the top 33 cities according to both criteria (jobs growth and U rate) for ease of posting to social media.

For Canada, Table 2 includes all 35 of the nation’s Census Metropolitan Areas (CMAs).

By the way, the latest available U.S. numbers are for June; for Canada, the coverage is through July. Sometimes Canadian data is a month ahead; but there are instances when it’s the other way around (e.g., retail sales statistics).

In Table 1, beige-colored highlighting shines a spotlight on the two U.S. cities that are among the Top 10 for both rapid jobs growth and low unemployment rates. According to this methodology, Raleigh and Detroit currently possess the Top Tier labor markets among America’s major cities.

Read the rest of ‘Mining’ for Best City Labor Markets, U.S. and Canada

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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.)

Read the rest of Multiple Layers to the Inflation Watch Story