Article source: ConstructConnect

If stagflation is to occur (i.e., a period of no or slow growth accompanied by high inflation), as is being projected by many prognosticators, one of its accompanying features will be a moderation in new homebuilding activity. Neither in the United States nor in Canada has such a turn of events become evident just yet. The canary installed in stagflation’s mine shaft to warn, through an interruption in its backing vocals, of possible serious economic troubles ahead, has not yet ceased its chirping.

U.S. housing starts in April at 1.724 million units, seasonally adjusted and annualized (SAAR), were little different from March’s figure of 1.728 million units. Also, they were down only slightly from the highest monthly number in more than a decade, February’s 1.777 million units.

Furthermore, residential building permits are still running ahead of starts. The permits number nationally in April was 1.819 million units SAAR. Permits have lain between 1.8 million and 1.9 million units (SAAR) for five months in a row.

Read the rest of Interest Rates, Housing Starts and Hoping the Canary Keeps Chirping

Article source: ConstructConnect

The breakouts in U.S. construction material input costs showed few signs of abating in March.

Table 1 presents year-over-year and latest-three-month percentage-change results for 15 Producer Price Index (PPI) series that bear on the materials cost side of construction projects. March 2022’s year-over-year percentage changes were in double digits in 13 of the 15 series; were +20% or more in 10 of the 15 series; and were +30% or more in 6 of the 15 series.

Beyond the big and not unexpected year-over-year energy-related cost jumps for diesel fuel (+63.8%), gasoline (+61.5%) and asphalt (+36.9%), the next greatest increases were recorded for steel bars, plates, and structural shapes (+45.4%), aluminum mill shapes (+43.7%) and particle board and OSB (+36.8%). The energy-related cost climbs tie to oil and gas supply interruptions and uncertainty created by the military action between Russia and Ukraine.

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The breakouts in U.S. construction material input costs showed few signs of abating in March.

Table 1 presents year-over-year and latest-three-month percentage-change results for 15 Producer Price Index (PPI) series that bear on the materials cost side of construction projects. March 2022’s year-over-year percentage changes were in double digits in 13 of the 15 series; were +20% or more in 10 of the 15 series; and were +30% or more in 6 of the 15 series.

Beyond the big and not unexpected year-over-year energy-related cost jumps for diesel fuel (+63.8%), gasoline (+61.5%) and asphalt (+36.9%), the next greatest increases were recorded for steel bars, plates, and structural shapes (+45.4%), aluminum mill shapes (+43.7%) and particle board and OSB (+36.8%). The energy-related cost climbs tie to oil and gas supply interruptions and uncertainty created by the military action between Russia and Ukraine.

Over a shortened period, running from December 2021 to March 2022, percentage-change increases were led by diesel fuel (+43.8%), softwood lumber (+41.2%), particle board and OSB (+41.0%), gasoline (+40.3%) and plywood (+31.6%).

Read the rest of Construction Material Costs – Spikes Everywhere

Article source: ConstructConnect

There’s much subject matter to be wrestled with in the pool of recent public and private sector data releases, so let’s leave our pina coladas (non-alcoholic, of course) beside our deck chairs and dive right in.

(1) U.S. inflation, at least as measured by the year-over-year change in the Consumer Price Index (CPI-U), eased a little in April. It edged back to +8.3% from +8.5% in March. The ‘core’ rate, which sets aside notably price-volatile items in food and energy, also retreated a bit, to +6.2% y/y from +6.5% y/y in the prior month.

(2) Inflation in Canada moved, to a minor degree, in the other direction, from +6.7% y/y in March to +6.8% y/y in April. Canada’s CPI, excluding food and energy, stayed the same as in the previous month, +4.6% y/y. The Bank of Canada, when it’s assessing inflation, focuses on three specially created measures which it has labeled ‘common’, ‘median’ and ‘trim’. The average for those three indices rose to +4.2% y/y in April from +3.9% y/y in March.
Read the rest of Mid-May Economic Nuggets, With an Emphasis on Inflation, Foreign Trade & Housing Stars

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U.S. current (March) inflation of +8.5% year over year for the All-items Consumer Price Index (i.e., known as CPI-U, with the ‘U’ signifying that it’s for urban consumers) is the highest this century. It’s more than four times greater than the +2.0% figure usually accepted as the desirable target. A little inflation is judged to be a good thing for the economy. Through making it easier to pay off loans, it greases the wheels of industry.

What +8.5% is not, though, is unique in a historical context. From 1951 through 1981, there were 59 months, or the equivalent of nearly five years, in which CPI-U exceeded +9.0% y/y. The most notable periods of extreme inflation occurred from January 1974 through July 1975 and from December 1978 through November 1982. Peak inflation was +14.8% y/y, recorded in March 1980.

There’s a great tradition among economists of arguing over what causes inflation. The discourse has pitted money supply theorists against those who keep a wary eye on excessive fiscal deficits. Plus, there’s the cost-push versus demand-pull impact to be sorted out.

Read the rest of Cost-Push, Demand-Pull, Easy-Money, Fiscal-Excess Inflation

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Table 1 is a one-place depiction of the key percentage-change metrics for the 2022 Q1 put-in-place (PIP) construction dollar volume statistics from the Census Bureau.

Total year-to-date spending is ahead by +12.0, owing more to residential, at +18.6%, than to nonresidential, +5.8%. The dollar volumes on which the percentage changes are based are in ‘current’ dollars. ‘Constant’ dollars would factor out inflation.

Given the exceptional advances in material input costs over the past year (see ‘Spikes Everywhere’ article here), and some decent-sized jumps in compensation rates as well, there’s a good chance the nonresidential percentage change year to date (+5.8%) would be close to zero or even possibly negative, if a price index were applied to the results.

Read the rest of Deciphering the Meaning of March’s U.S. Construction Put-in-place Stats

Article source: ConstructConnect

April was not a good period for stock markets. In North America, on a month-to-month basis, the DJI was -4.9%; the TSE -5.2%; the S&P 500, -8.8%; and NASDAQ, -13.3%.

On a year-over-year basis, only the Toronto Stock Exchange (TSE), which has a heavy weighting of resource sector firms, managed a gain, +8.7%. (Commodity prices have been on an upswing.) The S&P 500 was -1.2% y/y; the DJI, -2.7%; and NASDAQ, -11.7%.

Versus its 52-week high, NASDAQ was a stunning loser, at -23.9%. A drop of -20.0% or worse is known as ‘bear’ territory. The Russell 2000 index, for small cap firms, was also bearish in April, at -24.2% compared with its peak.

Several of the biggest high-tech firms have been missing profit targets (Meta), or suffering unexpected and uncharacteristic losses (Amazon), or seeing reductions in their number of subscribers (Netflix).

Runaway inflation and its unwelcome companion, interest rate hikes, have also been suppressing the investment sentiment of day traders, hedge funds and brokerage houses.

The net effect has been a pummeling of valuations unprecedented in a decade plus.
Read the rest of Anxiety Spells afflict Stock Markets in April

Article source: ConstructConnect

There’s much to cover, so let’s jump right into a discussion of the some of the most interesting information to be gleaned from the latest public and private sector data releases.

(1) Grizzled old economists, who have lived through previous periods of rapid price inflation, have never put their memories of those difficult periods fully behind them. For nearly two decades, they’ve annoyed their younger colleagues by repeatedly warning of the potential risks of inflation when it seemed the threat of that slumbering bugbear had forever been driven from the landscape. Turns out, they were right. March 2020’s U.S. Consumer Price Index (CPI-U) increase of +8.5% y/y was the highest in 40 years. The ‘core’ rate of inflation, which excludes volatile food and energy items, was +6.5% y/y in the latest month.

Read the rest of 8 Mid-April Economic Nuggets

Statistics Canada’s Labour Force Survey for March speaks of a +73,000 month-to-month gain in total number of jobs in the land of the red maple leaf.

The +73,000 figure is a respite from the wild swings in February and January that came in at +337,000 and -200,000 respectively.
In the context of the long-term pre-pandemic record of jobs change from month to month in Canada, +73,000 is quite okay.

Construction’s employment increase in March was +14,000. Construction, with a total level of employment of 1.534 million jobs, is catching up with manufacturing, with a total level of employment of 1.760 million jobs.
It’s by no means a foregone conclusion, however, that the total number of jobs in construction will eventually reach parity with manufacturing. Due to shortages of labor throughout the economy, construction work is likely to become more modular in nature, and that will slow the drift.
Nevertheless, there are numerous factors pointing to further robust increases in construction employment in the months and years ahead.
Housing starts in the nation have been booming. But international comparisons of existing housing stock (in units) per capita are placing Canada behind other industrialized nations, especially in Europe. To address this issue, the just-released federal budget includes provisions to hit the accelerator even more on residential homebuilding.

Read the rest of Canada’s March Jobs Report: Total +73,000; Construction +14,000

Article source: ConstructConnect

The three main U.S. stock market indices turned positive again during March, after dipping and diving through January and February.

The DJI from beginning to end of March was +2.3% after being -3.5% in February and -3.3% in January.

The S&P 500 was +3.6% in March after being -3.1% in February and -5.2% in January.

NASDAQ was +3.4% in the latest month after being -3.4% in February and -9.0% in January. (It should be noted that NASDAQ was in ‘bear’ territory not so long ago. From November 22, 2021, to March 14, 2022, NASDAQ’s high-to-low index level descent was -22.6%.)

Toronto’s stock exchange has performed better than the American indices, +3.6% in March, after being flat in February, at +0.1%, and down only a little in January, -0.6%. The TSE, or TSX as it is alternatively known, is heavily weighted with resource sector firms. Most commodity prices were firming up before Russia’s invasion of Ukraine, and the new geopolitical uncertainty has magnified the tendency for investors to want to hold physical assets, such as gold.

By the way, surges in commodity prices have historically been positive for the development and construction of mega-sized resource projects.

Read the rest of Pertaining to Stock Markets, Central Banks, and Supply Shortage Solutions