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ABC and ELFA 2015 Industry Projections

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ABC Reports: Construction Materials Prices Dip in December

CEU2“The U.S. economy has performed handsomely over the past nine months, according to most metrics, and conventional wisdom suggests that it can continue to expand at or above trend rates of growth.”—ABC Chief Economist Anirban Basu

PPI December 20142Construction input prices dipped 1.4 percent during the final month of 2014 and are down nearly 1 percent on a year-over-year basis, according to the Jan. 15 producer price index release from the U.S. Department of Labor. Inputs to nonresidential construction fell even farther, down 1.7 percent for the month and 1.9 percent year over year. December’s report marks the sharpest decline in input prices since late 2008 during the global financial crisis and the fifth consecutive month construction materials prices have failed to rise.

“Without question, financial markets have been unnerved by the recent declines in oil, copper and other commodity prices, although that jitteriness does not necessarily imply a serious economic problem in America,” said Associated Builders and Contractors Chief Economist Anirban Basu. “The fact is the U.S. economy has performed handsomely over the past nine months, according to most metrics, and conventional wisdom suggests that it can continue to expand at or above trend rates of growth despite economic weakening in Europe, China and elsewhere. This is further evidenced by the World Bank’s recent downgrade of its forecasts for global growth in 2015 and 2016, while it upgraded its outlook for the United States.

“Overall, the view that U.S. domestic demand for construction services and most other services continues to expand is consistent with the fact that some domestically produced and consumed materials actually registered price increases last month,” said Basu. “Note that concrete prices are up by 5 percent on a year-over-year basis while natural gas prices are up by 10 percent.”

The following materials prices increased in December.

  • Prices for plumbing fixtures expanded 0.1 percent in December and are up 3.1 percent on a year-over-year basis.
  • Concrete products prices expanded 0.7 percent in December and are up 5 percent on a yearly basis.
  • Natural gas prices expanded 19.7 percent in December and are 10 percent higher than one year ago.
  • Fabricated structural metal product prices grew 0.3 for the month and have expanded 1.5 percent on a year-over-year basis.

Seven of the 11 key construction inputs did not experience price increases for the month.

  • Iron and steel prices fell 1 percent in December and are down 3.9 percent from the same time last year.
  • Nonferrous wire and cable prices fell 1.6 percent on a monthly basis and 1.5 percent on a yearly basis.
  • Prices for prepared asphalt, tar roofing, and siding fell 1 percent for the month but are up 1.9 percent on a year-ago basis.
  • Steel mill products prices fell 1.3 percent for the month but are 0.4 percent higher than one year ago.
  • Softwood lumber prices fell 1.3 percent in December but are 0.3 percent higher than one year ago.
  • Crude petroleum prices fell 18.9 percent in December and are down 37.1 percent from the same time last year.
  • Crude energy materials prices fell 4.7 percent in December but are 19.6 percent lower year-over-year.

To view the previous PPI report, click here.

ABC Reports: Nonresidential Construction Hiring Surges

CEU2“The U.S. economy added an average of 289,000 jobs per month during the final three months of 2014, indicating that momentum is surging as we transition into 2015.”—ABC Chief Economist Anirban Basu.

Construction employment december 2014The U.S. construction industry added 48,000 jobs in December, including 22,800 jobs in nonresidential construction, according to the Bureau of Labor Statistics (BLS) preliminary estimate released Jan. 9. November’s estimate was unchanged in this release, remaining at 20,000 net new construction jobs, but nonresidential construction’s November jobs figure was upwardly revised to 7,100 jobs.

“The U.S. economy added an average of 289,000 jobs per month during the final three months of 2014, indicating that momentum is surging as we transition into 2015,” said Associated Builders and Contractors Chief Economist Anirban Basu. “This represents good news for the construction industry in 2015 and perhaps beyond, particularly with respect to office construction, retail construction, and other segments that benefit directly from accelerating job growth and decreasing unemployment. Overall, the economy has built steady momentum since the end of last winter adding an average of 246,000 jobs per month in 2014, an increase of more than 50,000 jobs added per month compared to 2013.”

According to the BLS household survey, the national unemployment rate fell to 5.6 percent in December. This represents the lowest level of unemployment since June 2008. The declining unemployment rate is most likely a result of a labor force that shrank by 273,000 persons in December, after expanding in the previous two months. The labor force participation rate fell by .02 percent and now sits at 62.7 percent.

“One of the most interesting aspects of the report is that construction unemployment ended the year at 8.3 percent on a non-seasonally adjusted basis,” said Basu. “While construction firm executives have been worried for years about the specter of construction skills shortages, the BLS data indicate there are plenty of people looking for jobs in construction. It is likely that many of these prospective workers lack the skills necessary to fill the openings construction firms are seeking to fill or live in areas where construction employment growth is much slower. Normally, high construction unemployment would imply slow rates of wage and compensation increases; however, ABC believes this is not the case. Because of the presence of skills mismatches, wage gains are likely to be sizeable in 2015 even in the presence of lofty rates of construction unemployment.”

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

  • Nonresidential building construction employment expanded by 10,000 for the month and is up by 23,400 jobs, or 3.4 percent, since December 2013.
  • Residential building construction employment expanded by 800 jobs in December and is up by 44,500 jobs, or 7 percent, on an annual basis.
  • Nonresidential specialty trade contractors added 12,800 jobs for the month and employment in that category is up by 76,900 jobs, or 3.7 percent, from the same time one year ago.
  • Residential specialty trade contractors gained 12,700 jobs in December and have added 87,600 jobs, or 5.6 percent, since December 2013.
  • The heavy and civil engineering construction segment gained 11,600 jobs in December and job totals are up by 57,900, or 6.6 percent, on a year-over-year basis.

To view the previous employment report, click here.

ABC Reports: Nonresidential Construction Spending Dips in November

CEU2“Nonresidential construction spending dipped in November, ending four consecutive months of spending growth”—ABC Chief Economist Anirban Basu.

1.2.15 spendingNonresidential construction spending fell 1 percent on a monthly basis in November, but has still managed to expand 4 percent on a year-over-year basis according to the Jan. 2nd release from the U.S. Census Bureau. Spending for the month totaled $617 billion on a seasonally adjusted, annualized basis. Moreover, the government revised the October spending figure up from $611.8 billion to $622.9 billion.

“November’s drop in nonresidential construction spending ends four consecutive months of spending growth, but represents only a minor dip in the industry’s momentum,” said Associated Builders and Contractors Chief Economist Anirban Basu. “November’s figure would have represented a continuation of nonresidential spending’s steady recovery were it not for a sizable upward revision to October’s data (+$11.1 billion). Through the first 11 months of 2014, nonresidential spending is up 6.6 percent from the same point in 2013 and with only December’s spending data yet to be revealed, it is a near certainty that yearly nonresidential spending will top the $600 billion mark for the first time in the past five years.

“Conditions remain conducive to continued construction spending growth,” said Basu. “Both the quantity and quality of job growth continues to improve, which will fuel the ongoing recovery in office-related spending. The dip in oil prices may provide the strongest headwind for construction spending growth. Not only will inexpensive fuel greenlight construction projects that may otherwise be stalled, it also serves to boost consumer spending. This in turn may lead to more construction starts, specifically in the lodging and amusement and recreation categories.

Five of 16 nonresidential construction subsectors posted increases in spending in November on a monthly basis.

  • Lodging construction spending ticked up 0.1 percent on a monthly basis and is up 11.3 percent on a year-over-year basis.
  • Communication construction spending expanded 0.5 percent for the month, but is down 17.5 percent on an annual basis.
  • Sewage and waste disposal-related construction spending gained 2.6 percent for the month and has grown 13.6 percent on a 12-month basis.
  • Highway and street-related construction spending grew 0.3 percent in November and is up 5.7 percent compared to the same time last year.
  • Power construction spending grew 0.3 percent for the month and is 5.7 percent higher than at the same time one year ago.

Spending in 11 nonresidential construction subsectors declined in November.

  • Conservation and development-related construction spending fell 6.5 percent for the month but is up 29 percent on a yearly basis.
  • Health care-related construction spending fell 4.4 percent for the month and is down 7.5 percent on an annual basis.
  • Education-related construction spending fell 2 percent for the month and is up 3.2 percent on a year-over-year basis.
  • Spending in the water supply category fell 1.6 percent from October and down 2.3 percent lower than at the same time last year.
  • Construction spending in the transportation category fell 0.3 percent on a monthly basis but has expanded by 5.3 percent on an annual basis.
  • Public safety-related construction spending fell 5.3 percent on a monthly basis and is down 8.6 percent on a year-over-year basis.
  • Commercial construction spending lost 1.9 percent in November but is up 8.4 percent on a year-over-year basis.
  • Office-related construction spending fell by 1.7 percent in November but is up 14.7 percent from the same time one year ago.
  • Manufacturing related spending was flat in November and is up 21 percent for the year.
  • Amusement and recreation-related construction spending fell 2.2 percent on a monthly basis and is up 4.8 percent from the same time last year.
  • Religious spending fell 2.9 percent for the month and is down 0.3 percent from the same time last year.

To view the previous spending report, click here.

ABC Reports: Nonresidential Construction Adds Nearly 5,000 Jobs in November

CEU2“Nonresidential construction added nearly 5,000 jobs in November and the outlook remains positive.”—ABC Chief Economist Anirban Basu.

Employment November 2014The U.S. construction industry added 20,000 jobs in November, with nonresidential construction contributing 4,900 of them, according to the Bureau of Labor Statistics preliminary estimate released Dec. 5. October’s overall construction estimate was revised downward from 12,000 to 7,000 net new jobs and nonresidential construction lost 2,100 jobs in October, after revisions.

“Nonresidential construction added nearly 5,000 jobs in November and the outlook remains positive,” said Associated Builders and Contractors Chief Economist Anirban Basu. “It is important to note that the greatest constraint on nonresidential job growth may no longer be a lack of demand for construction services, but rather a lack of supply of sufficiently skilled workers. Growing demand for human capital coupled with tighter labor markets strongly suggests that industry wage pressures will expand in 2015, perhaps to the extent that margins will be rendered too thin for many firms, even in the face of rising demand for services.

“While the national construction unemployment rate expanded from 6.4 percent to 7.5 percent on a non-seasonally adjusted basis in November, this is primarily due to seasonal factors,” Basu explained. “The construction unemployment rate has historically expanded during the colder months of the year, and November’s figure should not be seen as a cause for concern.

“The U.S. economy has shifted into a higher gear,” said Basu. “A combination of surging stock prices, lower energy costs, rising consumer confidence, solid job creation, and improvement in the quality of jobs being added has helped move the economy closer to a sustained 3 percent rate of growth. For the most part, this represents good news for the nonresidential construction industry.”

According to the Bureau of Labor Statistics’ household survey, the national unemployment rate remained unchanged at 5.8 percent in November. The labor force once again expanded in October, growing by 119,000 persons. After shrinking in August and September, the labor force has now expanded in consecutive months. The labor force participation rate remained unchanged at 62.8 percent in November.

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

  • Nonresidential building construction employment fell by 2,400 jobs for the month but is up by 9,500 jobs, or 1.4 percent, since November 2013.
  • Residential building construction employment expanded by 3,400 jobs in November and is up by 47,300 jobs, or 7.5 percent, on an annual basis.
  • Nonresidential specialty trade contractors added 7,300 jobs for the month and employment in that category is up by 47,400 jobs, or 2.2 percent, from the same time one year ago.
  • Residential specialty trade contractors gained 13,300 jobs in November and have added 75,500 jobs, or 4.8 percent, since November 2013.
  • The heavy and civil engineering construction segment lost 1,300 jobs in November and job totals are up by 33,200, or 3.7, percent on a year-over-year basis.

To view the previous employment report, click here