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ABC Reports: Construction Materials Prices Remain Tame in April

CEU2“April marks only the second time that price increases have been so suppressed over such a prolonged period.” —ABC Chief Economist Anirban Basu.

PPI_April15Prices for inputs to construction industries fell by 0.1 percent in April, ending a two month streak during which material prices expanded by greater than 0.4 percent. Prices have now fallen in six of the previous eight months and input prices are also down on a year-over-year basis, falling 4 percent since April 2014. This represents the greatest year-over-year decline since October 2009 and year-over-year input prices have now declined for 5 straight months after expanding in each of the previous 60 months. Prices for inputs to nonresidential construction showed a similar decline, falling 0.1 percent for the month and 5.1 percent year-over-year. Crude petroleum prices expanded for only the second time in the previous ten months, growing by 13.1 percent, the largest month-over-month increase since November 2011.

“Construction input prices have now fallen by greater three percent on a yearly-basis in each of the year’s first four months,” said Associated Builders and Contractors Chief Economist Anirban Basu. “This is only the second time that price increases have been so suppressed over such a prolonged period and the first since the middle of the financial crisis in the second and third quarter of 2009. That said, the underlying dynamics of this period of downward trending prices are fundamentally different than those experienced in 2009.

“Two major factors contributed to April’s falling prices,” said Basu. “The strong U.S. dollar, which has expanded by over ten percent against the currencies of the United States’ primary trading partners, has neutralized any underlying inflationary pressures. The other key factor in the subdued price growth is lower energy prices. Consider that prices for crude petroleum, natural gas, and crude energy materials are all over 40 percent lower than in April 2014.

“The U.S. economy continues to disappoint as the expectation had been that the U.S. economy would significantly outperform the balance of the advanced world’s economy this year,” said Basu. “While there is still a chance that that could happen, several sectors of the economy continue to underperform, none worse than retail. Data released yesterday indicate that sales remain flat despite improved weather.

“One of the byproducts of a slow economic start has been a weakening dollar,” said Basu. “Most forecasters had predicted that the U.S. dollar would march toward parity with the Euro. That hasn’t happened and as of this morning, one euro buys $1.14. A weakening dollar is consistent with rising input prices, and should lead to renewed price growth in the near future. For now, however, the impact of previous increases in the value of the dollar are dominating price dynamics.”

Only four of the key materials prices increased in April.

  • Softwood lumber prices expanded 2.6 percent but are 4.7 percent lower than one year ago.
  • Crude petroleum prices expanded 13.1 percent in April but are down 50.4 percent from the same time last year.
  • Crude energy materials prices gained 1.7 percent in April but are 42.2 percent lower year-over-year.
  • Concrete products prices grew 1.3 percent in April and are up 5.1 percent on a yearly basis.

Seven of the 11 key construction inputs did not expand for the month.

  • Fabricated structural metal product prices dropped 0.5 percent lower for the month but have expanded 0.8 percent on a year-over-year basis.
  • Natural gas prices fell 11.8 percent in April and are down 47.9 percent from the same time one year ago.
  • Prices for plumbing fixtures fell 0.1 percent in April, but are up 1.5 percent on a year-over-year basis.
  • Prices for prepared asphalt, tar roofing, and siding fell 2.5 percent for the month and are down 1.9 percent on a year-ago basis.
  • Iron and steel prices fell 2 percent in April and are down 14.5 percent from the same time last year.
  • Steel mill products prices fell 3.4 percent for the month and are 8.7 percent lower than one year ago.
  • Nonferrous wire and cable prices fell 0.3 percent on a monthly basis and shed 2.8 percent on a yearly basis.

To view the previous PPI report, click here

ABC Reports: Nonresidential Construction Bounces Back with the Broader Economy

CEU2“Ongoing demand for labor and April’s reasonably strong employment gains suggest that many employers continue to search for additional staffing.” —ABC Chief Economist Anirban Basu.

Employment_5.8The U.S. construction industry added 45,000 jobs in April according to the May 8 Bureau of Labor Statistics preliminary estimate. March’s estimate was revised downward from -1,000 to -9,000 net new jobs. Nonresidential construction employment increased by 12,400 jobs in April, with nonresidential specialty trade contractors leading the way with 20,200 new jobs. Nonresidential building employment plummeted for the month, losing 7,800 jobs. The residential sector bounced back in April, adding 23,600 jobs.

“While the broader jobs report proved better than expected, April was the best month for construction employment since January 2014,” said Associated Builders and Contractors Chief Economist Anirban Basu. “Though it may have been expected to see solid job creation performance reflected in today’s report, it is still a relief to obtain a nice piece of data. Economic data regarding retail sales, industrial production, and other elements of economic life have largely been disappointing to date and the March jobs report fell in line with that series of uninspired results. Data regarding unemployment claims strongly suggested that employers viewed the recent bout of economic weakness as temporary. The lack of new lay-off activity indicates an ongoing demand for labor and April’s reasonably strong employment gains suggest that many employers continue to search for additional staffing.

“After losing 9,000 jobs in March, the 45,000 jobs gain posted in April exceed all expectations,” said Basu. “Construction spending should expand in the coming months as projects that were delayed during winter come to fruition.”

The national unemployment rate inched down to 5.4 percent in April. While shedding a tenth of a percent is nothing remarkable in its own right, the falling unemployment rate looks significantly better when you consider that the labor force added 166,000 new workers in April. The labor force participation rate inched up to 62.8 percent in April. The construction unemployment rate fell to 7.5 percent in April, a 2 percent decrease from March. The falling construction unemployment rate suggests that construction activity may finally be rebounding from the winter lull.

“The lone underperforming segment in April was mining and logging, which lost 15,000 net jobs,” said Basu. “The sector has now lost jobs in each of the year’s first four months after gaining jobs in every month of 2014. Mining and logging has lost more jobs during the first quarter of this year (-48,000) than it added in all of 2014 (+42,000), a direct result of the plummeting oil prices.

“While the loss of mining and logging jobs isn’t necessarily a good thing for the economy, it has likely had a beneficial effect on construction employment,” said Basu. “Displaced mining and logging workers are likely finding employment in the construction industry, which has experienced sharp regional labor shortages in the past few years. This may be the cause of the 2 percentage point decrease in the construction unemployment rate.”

Construction employment for the month and the past year breaks down as follows:

  • Nonresidential building construction employment fell by 7,800 jobs for the month but is up by 16,600 jobs or 2.4 percent since April 2014.
  • Residential building construction employment expanded by 2,800 jobs in April and is up by 41,200 jobs or 6.3 percent on an annual basis.
  • Nonresidential specialty trade contractors added 20,200 jobs for the month and employment in that category is up by 76,400 jobs or 3.5 percent from the same time one year ago.
  • Residential specialty trade contractors added 20,800 net new jobs in April and has added 102,400 jobs or 6.8 percent since April 2014.
  • The heavy and civil engineering construction segment added 8,400 jobs in April and employment is up by 33,100 positions or 3.6 percent on a year-over-year basis.

To view the previous employment report, click here

ABC Reports: Nonresidential Construction Spending Inches Lower in March

CEU2“Up until six months ago, the U.S. economy was manifesting surging momentum, but the last six months have been disappointing.”—ABC Chief Economist Anirban Basu

Spending 5.1Nonresidential construction spending has now declined during each of the year’s first three months, according to a May 1 report by the U.S. Census Bureau. In March, nonresidential construction spending fell 0.1 percent on a monthly basis, though the pace of spending is still 4.7 percent higher than at the same time one year ago. Spending for the month totaled $611.8 billion on a seasonally adjusted, annualized basis. Spending estimates for both January and February were upwardly revised—the estimate for February construction spending rose from $611.5 billion to $612.4 billion and January’s estimate was revised from $611.9 to $613.1.

“Up until six months ago, the U.S. economy was manifesting surging momentum, but the last six months have been disappointing.” said Associated Builders and Contractors Chief Economist Anirban Basu. “The recovery’s momentum has slowed to a crawl. Lower energy prices and their impact on investment spending, a stronger U.S. dollar, weather, and the West Coast port slowdown have all conspired to undo the economic momentum apparent during mid-year 2014. However, there is little reason for despair. Last year also got off to a hobbled start, but the economy still managed to expand 2.4 percent in 2014. This year can still be better, including for nonresidential construction.”

Seven of 16 nonresidential construction subsectors posted increases in spending in March on a monthly basis.

  • Manufacturing-related construction spending expanded 3 percent in March and is up 50.3 percent for the year.
  • Office-related construction spending expanded 2.2 percent in March and is up 19.8 percent from the same time one year ago.
  • Construction spending in the transportation category grew 1 percent on a monthly basis and has expanded 9.2 percent on an annual basis.
  • Lodging-related construction spending was up 5.2 percent on a monthly basis and 22 percent on a year-over-year basis.
  • Health care-related construction spending expanded 0.2 percent for the month, but is down 0.2 percent for the year.
  • Spending in the water supply category expanded 4 percent from February and is up 2.3 on an annual basis.
  • Communication-related construction spending expanded 12.3 percent for the month and is down 8.5 percent for the year.

Spending in nine nonresidential construction subsectors failed to rise in March.

  • Public safety-related construction spending slipped 2.8 percent on a monthly basis and is down 9.1 percent on a year-over-year basis.
  • Commercial construction spending was down 2.2 percent in March, but is up 12.8 percent on a year-over-year basis.
  • Religious spending fell 5.1 percent for the month and is down 17.6 percent from the same time last year.
  • Sewage and waste disposal-related construction spending shed 0.2 percent for the month, but has grown 19.6 percent on a 12-month basis.
  • Power-related construction spending fell 4.5 percent for the month and is 17.2 percent lower than at the same time one year ago.
  • Highway and street-related construction spending fell 2.4 percent in March and is down 5.3 percent compared to the same time last year.
  • Conservation and development-related construction spending fell 11.4 percent for the month, but is up 12.3 percent on a yearly basis.
  • Amusement and recreation-related construction spending fell 3 percent on a monthly basis, but is up 23.8 percent from the same time last year.
  • Education-related construction spending fell 1.8 percent for the month and is down 3 percent on a year-over-year basis.

To view the previous spending report, click.

ABC Reports: Construction Materials Prices Expand in March

CEU2“Although overall construction materials prices rose for the month, prices for more categories of materials decreased than increased” —ABC Chief Economist Anirban Basu.

PPI_Mar15Prices for inputs to construction industries expanded 0.8 percent in March, the largest monthly increase in more than two years, according to the April 14 producer price index release by the Bureau of Labor Statistics. Prices have now expanded for two consecutive months after declining during the prior six; however input prices are down 3.6 percent on a year-over-year basis. March marks the fourth consecutive month year-over-year input prices have declined, the longest such streak since 2009. Crude petroleum prices fell 4 percent in March and have fallen in eight of the previous nine months.

“Although overall construction materials prices rose for the month, prices for more categories of materials decreased than increased, including sharp monthly declines in the price for softwood lumber and iron/steel,” said Associated Builders and Contractors Chief Economist Anirban Basu. “On a year-over-year basis, deflationary pressures are even more apparent as crude petroleum prices are down 55 percent and natural gas is down 45 percent, despite an increase in gas prices in March.

“Though U.S. nonresidential and residential segments continue to expand, global construction volumes remain suppressed by widespread weakness in Asia, Europe and Latin America,” said Basu. “With the U.S. dollar likely to get stronger over the next few months as domestic interest rates begin to rise, there is little likelihood of significant increases in construction input prices over the next six to nine months. Overall producer prices managed to increase 0.5 percent on a monthly basis, the first increase since June 2014. This reading serves to increase the likelihood that the Federal Reserve will begin to increase short-term interest rates later this year.”

Only two of the key materials prices increased in March.

  • Fabricated structural metal product prices inched 0.4 percent higher for the month and have expanded 1.3 percent on a year-over-year basis.
  • Natural gas prices expanded 1.5 percent in March, but are down 45.3 percent from the same time one year ago.

Nine of the 11 key construction inputs did not expand for the month.

  • Prices for plumbing fixtures fell 0.3 percent in March but are up 2.5 percent on a year-over-year basis.
  • Prices for prepared asphalt, tar roofing, and siding fell 0.4 percent for the month and are down 0.2 percent on a year-ago basis.
  • Iron and steel prices fell 2.5 percent in March and are down 11.5 percent from the same time last year.
  • Steel mill products prices fell 1.9 percent for the month and are 4.8 percent lower than one year ago.
  • Softwood lumber prices fell 4.1 percent and are 7.4 percent lower than one year ago.
  • Nonferrous wire and cable prices remained flat on a monthly basis and grew 2.5 percent on a yearly basis
  • Crude petroleum Crude energy prices fell 4 percent in March and are down 55 percent from the same time last year.
  • Crude energy materials prices fell 1.4 percent in March but are 43.7 percent lower year over year.
  • Concrete products prices remained flat in March and are up 4.1 percent on a yearly basis.

To view the previous PPI report, click here

ABC Reviews Construction Job Market


ABCRecently, Associated Builders and Contractors (ABC) launched its state-by-state economic analysis with the release of economist Bernard Markstein’s
 analysis of construction’s contribution to each state’s gross domestic product. Below is Markstein’s analysis of the construction job market and unemployment rate in each state. This analysis will be produced monthly in addition to ABC’s existing national economic data and analysis. Background on how the data was derived and Markstein’s methodology is also available.

Overview

Bad weather often typifies February across much of the country and this February’s weather was particularly harsh. The not seasonally adjusted (NSA) construction unemployment rate for the country often peaks around February and the nation appears to be on track for that pattern this year. The February construction unemployment rate for the country along with estimated rates for 34 states increased over their respective January rates.

The weather around the winter months also makes it more difficult to judge the health of the construction industry. Nonetheless, construction appears to be on an upward trajectory across much of the nation. On a year-over-year basis, February construction unemployment rates were down in 44 of the 50 states along with the U.S. rate.

The Top Five States

Four of the top five states with the lowest February construction unemployment rate (or in the case of Nebraska and Hawaii, the construction and mining unemployment rate) remained the same as in January, though the order was somewhat different. Hawaii, which ranked number one in January, fell to number four in February. North Dakota took over the top spot, moving up from number five in January.

February’s top five states ranked from lowest unemployment to highest are:

  • North Dakota
  • Nebraska
  • Utah
  • Hawaii
  • Wyoming

Given the downturn in oil prices and North Dakota’s recent dependence on oil-driven economic development, it may seem somewhat surprising that the construction unemployment rate remained relatively low for that state; however, two factors are likely at work. First, most new unemployment is probably occurring in the energy sector, which does not show up in construction unemployment. Second, many of the people who are employed in the North Dakota energy economy are from other states. When they no longer have a job there, most of them return to their home state or to a state where there may be jobs for them.

Nebraska (with a combined construction and mining unemployment rate) had the second lowest unemployment rate in February, moving up from number three in January (revised from the originally reported number four position).

Utah slipped from number two in January to number three in February. Texas, which was ranked fourth in January (revised from third), fell back to seventh in the February rankings. Wyoming moved into the top five at number five from sixth in January.

The Bottom Five States

Four of the five states with the highest construction unemployment rates for February also remained the same as in January based on revised data, though the order was somewhat different. Rhode Island had the highest rate in both February and January.

February’s bottom five states ranked from highest unemployment rate to lowest are:

  • Rhode Island
  • Connecticut
  • West Virginia
  • New Jersey
  • Illinois

Connecticut had the second highest unemployment rate in February, up from the third highest in January. West Virginia moved into the bottom five in February, ranking at number three compared to number six in January.

New Jersey had the fourth highest rate in February after registering the fifth highest rate in January (New Jersey originally reported the sixth highest in January, but based on revised data, moved to fifth). Michigan, which was fifth highest in January before data revisions, was seventh highest after the revisions and remained at that spot in February.

Illinois improved from the second highest rate in January to fifth highest in February. Indiana, which was fourth highest in January, moved out of the bottom five to ninth highest in February.

Read more on ABC’s website