Tag Archive for 'Associated Builders and Contractors'
Construction input prices rebounded in December after experiencing a steep decline in November, according to analysis of U.S. Bureau of Labor Statistics data released today by Associated Builders and Contractors (ABC). Input prices rose 0.4 percent for the month and are up 2.1 percent year-over-year, the largest 12-month increase in 30 months.
Nonresidential input prices collectively experienced a slightly larger increase, due in part to surging iron and steel prices, rising 0.6 percent for the month and 2.2 percent on the year. Though a number of input categories have experienced significant increases in prices in recent months, the overall price gains are largely attributable to energy prices. Crude petroleum prices rose 18.9 percent for the month, natural gas prices rose 23.1 percent and unprocessed energy materials rose 14.6 percent. Concrete products and the category that includes prepared asphalt experienced minimal declines in prices in December.
“While there are a number of factors that have contributed to the recent firming in input prices, recent deals made by OPEC and non-OPEC members to suppress oil production is the most consequential,” said ABC Chief Economist Anirban Basu. “While oil prices remain above where they were before production agreements were reached, the price of oil has generally failed to rise much beyond $50.
“Other factors have also led to a steady rise in materials prices including an improving global economy,” said Basu. “While not accelerating dramatically, global economic growth in 2017 is expected to exceed 2016’s performance, with nations like Brazil and Russia no longer mired in deep recessions. U.S. economic growth is also expected to be stronger in 2017, lifting the overall global economic outlook and supporting more bullish commodity markets.
“It is probably too early for contractors to become excessively preoccupied with rising materials prices,” said Basu. “Despite recent signs of economic improvement, massive levels of debt and commercial vacancy in much of the world will constrain both worldwide economic growth and global construction. Moreover, commodity traders among others are well aware that the planet is physically able to supply plenty of oil, natural gas and many other commodities, particularly if prices rise further. That knowledge in and of itself tends to place a lid on input price increases absent a major geopolitical event.”
December Construction Input Prices
National construction employment declined by 3,000 net jobs on a seasonally adjusted basis in December, according to analysis of U.S. Bureau of Labor Statistics data released today by the Associated Builders and Contractors (ABC).
The industry added 102,000 net new jobs on a year-over-year basis, the smallest increase in more than four years. Of the five subsectors, only residential specialty trade contractors added jobs in December (11,700 net new jobs). Nonresidential construction lost 13,400 net jobs for the month, largely due to losses in heavy and civil engineering, which lost 8,900 jobs. These data are adjusted for seasonal variations, which means that one cannot simply blame the poor job performance on the transition from November to December.
“A terrific nonresidential construction spending report arrived earlier this week, leading to expectations of a more upbeat assessment of the construction employment situation than provided by today’s report,” said ABC Chief Economist Anirban Basu. “The spending report indicated that nonresidential spending expanded to $712.4 billion on a seasonally adjusted, annualized rate in November, representing the highest level of spending in eight years.
“One possible way to reconcile seemingly contradictory data is to point out that construction firms are reporting greater difficulty filling available positions,” said Basu. “More than 80 percent of ABC members report difficulty finding appropriately skilled labor. Accordingly, many construction firms are required to do more with fewer people, which should eventually show up in construction productivity data that reflect the amount of output generated by the average worker on a per-hour-worked basis.
“The significant number of jobs lost in the heavy and civil engineering segment indicates that U.S. spending on infrastructure remains low,” said Basu. “For much of the year, the level of spending in publicly-financed segments was stuck in reverse, and today’s data indicate that increased investment in the shared built environment is much needed.
“There were jobs lost in privately-financed segments as well,” said Basu. “Employment in nonresidential building construction dipped by 1,300 in December. While that’s not a massive loss, it is somewhat surprising given data regarding construction spending, including in the office and lodging segments.”
The construction unemployment rate expanded by 1.7 percentage points in December and stands at 7.4 percent. This figure, however, is not seasonally adjusted, and construction industry unemployment has increased from November to December during each of the prior sixteen years by an average of 2 percentage points. The national unemployment rate ticked higher to 4.7 percent in December. That statistic is seasonally adjusted.
December 2016 Construction Employment
Nonresidential construction surged in November, according to analysis of U.S. Census Bureau data released today by Associated Builders and Contractors (ABC). Nonresidential spending expanded to $712.4 billion on a seasonally adjusted, annualized rate in November, representing the highest level of spending in eight years.
October’s figure was upwardly revised by 1 percent (from $699.7 billion to $706.5 billion), while September’s figure was upwardly revised by 0.8 percent (from $701.7 billion to $707.2 billion). A bit more than half of the 16 subsectors experienced spending increases in November.
“Today’s strong spending report contributed to a bright short-term outlook for the commercial and industrial construction sectors,” said ABC Chief Economist Anirban Basu. “Nonresidential construction spending is up approximately 5 percent on a year-over-year basis, and momentum should build further.
“With a new presidential administration coming to Washington there is a presumption that the economic dynamics of the near-term future will be markedly different than they have been,” said Basu. “If the last few weeks are any indication, the 2017 economy will be associated with tax cuts, more government spending, less financial regulation, faster economic growth, a stronger U.S. dollar, robust stock market performance and greater overall CEO confidence. That should translate into improved construction spending moving forward.
“It should be noted that data for November largely reflect the economic dynamics of the past,” said Basu. “Many construction firms have reported that they remain busy but have become concerned that work could dry up in certain markets in 2017 or 2018. This has been due to a combination of factors, including evidence of overbuilding in segments such as lodging and office buildings, even in Tier 1 markets like New York and Miami.
“Some are of course unnerved by prospects for shrinking exports given a stronger U.S. dollar, larger budget deficits and rising interest rates,” said Basu. “These are legitimate concerns and may ultimately serve to suppress U.S. economic dynamism. However, for now, the nonresidential construction outlook remains promising. The major source of uncertainty regarding the near-term outlook stems from whether the incoming administration will successfully pass an infrastructure package and how quickly such legislation would translate into stepped-up public construction spending.”
Construction input prices experienced their most rapid monthly decline since February 2016 in November, falling 0.5 percent according to the U.S. Bureau of Labor Statistics. Despite the month-over-month fall, input prices are up by 0.5 percent on a yearly basis for the second consecutive month.
Nonresidential input prices fell 0.7 percent for the month but are up 0.4 percent on the year. Crude petroleum, natural gas and unprocessed energy materials prices have all risen significantly since November 2015. Only three key inputs prices—plumbing fixtures and fittings; nonferrous wire and cable; and prepared asphalt, tar roofing and siding products—have fallen on a year-over-year basis.
“The current period of slack material prices may soon come to represent the calm before the storm,” said Associated Builders and Contractors Chief Economist Anirban Basu. “In recent days, various oil producers have continued to negotiate production ceilings in an attempt to boost prices. While oil prices remain low by 2014 standards, they have increased significantly over the course of the year and have roughly doubled since hitting a cyclical low point in February 2016. Natural gas prices have also been tilting higher. The same can be said for shipping costs, copper and other items that can impact the financial performance of construction firms.
“The recent rally in U.S. stock prices suggests that investors believe that America is now positioned for a period of more rapid economic growth,” Basu said. “This belief is also consistent with the notion that inflationary pressures will continue to build and interest rate increases will be more aggressive than expected prior to the presidential election. With wage pressures building, contractors will need to be extremely careful in bidding on projects, particularly large ones. Construction cost increases are likely to prove more profound than what has been experienced in recent years, and contractors should consider that while negotiating their contractual commitments.”