Tag Archive for 'Associated Builders and Contractors'

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Construction Input Prices Plummet in November Prices Up Slightly Year Over Year

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.”

ABC Predicts Modest Growth for 2017 Nonresidential Construction Sector; Warns of Vulnerability for Contractors

Associated Builders and Contractors (ABC) forecasts a slowdown of growth in the U.S. commercial and industrial construction industries in 2017. While contractors are vulnerable to rising commodity prices and potential interest rate increases in 2017, the middling consumer-led recovery should still lead to modest growth in construction spending and employment.

“The U.S. economy continues to expand amid a weak global economy and, despite risks to the construction industry, nonresidential spending should expand 3.5 percent in 2017,” said ABC Chief Economist Anirban Basu. “For more than two years, the Federal Reserve has been able to focus heavily on stimulating economic growth and moving the nation toward full employment. However, as commodity prices, including energy prices, firm up and labor costs march higher, the Federal Reserve will need to be more concerned about rising inflation expectations going forward. Associated increases in interest rates could have significantly negative impacts on certain asset prices, including stocks, bonds, commercial real estate and apartment buildings.

“Contractors also should be prepared for increases in commodity prices, which could translate into further stagnation in construction spending volumes if the purchasers of construction services are not prepared for related cost increases,” warned Basu. “Additionally, data from the U.S. Bureau of Labor Statistics indicate that construction job openings stand at a 10-year high and that average hourly earnings for construction workers rose above $28 per hour in 2016. The demand for construction workers is positioned to remain high and is likely to increase already significant wage pressures.

“However, there is a bullish scenario,” said Basu. “According to the Bureau of Economic Analysis, the average age of all fixed assets, including structures such as factories and hospitals, stands at 23 years—the oldest on record tracing back to 1925—and there is a collective awareness among American enterprises that they will need to replace much of their capital stock in future years. In addition, now rising energy prices could produce more investment and rising earnings—potentially translating into better support for asset prices, ongoing hiring and consumer spending.

“Despite some headwinds, many construction firms continue to report that they remain busy and ABC’s most recent Construction Confidence Index revealed that while construction firm leaders are not quite as confident as they were in prior quarters, most continue to expect growth in sales, margins and staffing levels,” concluded Basu.

Basu’s full forecast is available in the December issue of ABC’s Construction Executive magazine, along with the regional outlook for commercial and industrial construction by Dr. Bernard Markstein, president and chief economist of Markstein Advisors, who conducts state-level economic analysis for ABC.

ABC Reports: Construction Job Growth Accelerates Amid Optimistic Post-Election Outlook in November

1291931467352794367The U.S. construction industry added 19,000 net new jobs in November and has now added jobs for three consecutive months, according to analysis of U.S. Bureau of Labor Statistics data released today by Associated Builders and Contractors (ABC).

Industry employment is up by 2.4 percent on a year-over-year basis, considerably faster than the overall economy’s 1.6 percent job growth rate. Construction industry employment growth would likely be much sharper if more suitably skilled or trainable workers were available to fill available job openings. The skilled labor shortage appears to be impacting nonresidential activity more than residential. The nonresidential sector added 1,100 net new jobs in November, while the residential sector added 19,600 positions. Heavy and civil engineering lost 2,100 jobs for the month.

“The demand for construction talent was strong before the election, and the outcome has improved the near-term outlook for private and public construction activity,” said ABC Chief Economist Anirban Basu. “The implication is that demand for construction workers is positioned to remain high, which will translate into gradual reduction in industry unemployment and significant wage pressures.

“Some of these wage pressures are already evident,” said Basu. “Construction firms in the nation’s hottest markets, including New York, Seattle and Miami, report that in certain occupational categories, compensation is rising at a 10 percent per annum pace or more. This appears to be particularly true for construction superintendents and managers.

“Next year is shaping up to be a good one for both residential and nonresidential construction segments,” said Basu. “Of the two branches of the industry, nonresidential likely offers the larger upside. An infrastructure-led stimulus package would largely be oriented around nonresidential activities. Moreover, in certain markets, there is evidence that the apartment market is approaching saturation. Expected increases in interest rates next year would also tend to hit certain residential activities (i.e., single-family construction) more forcefully.”

The construction unemployment rate remained unchanged at 5.7 percent in November. One might have expected that this rate would have declined given the generally elevated levels of demand for construction talent. However, there are certain parts of the country that are softer economically, including many commodity-rich communities that have been impacted by lower oil and natural gas prices. Moreover, it is difficult to assess the skill level of jobseekers.

The unemployment rate for all U.S. industries fell to 4.6 percent, the lowest rate since mid-2007 and 0.3 percentage points below October’s rate. The labor force lost 226,000 persons for the month, but is still more than 2 million people larger than at the same time one year ago.

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ABC Reports:Nonresidential Construction Spending Gains Momentum

1291931467352794367Nonresidential construction spending totaled $699.7 billion on a seasonally adjusted, annualized basis in October, a 0.3 percent decrease from September’s significantly upwardly revised total, but an increase of 2.6 percent year-over-year according to analysis of U.S. Census Bureau data released today by Associated Builders and Contractors (ABC).

September’s nonresidential spending estimate was revised from $690.5 billion to $701.7 billion, a 1.6 percent increase. August’s estimate received a similar revision, increasing from $696.6 billion to $703.6 billion. Nonresidential spending is now 2.6 percent higher than at the same time one year ago.

“While the construction spending data remain challenging to interpret, the general story is still positive overall,” said ABC Chief Economist Anirban Basu. “Nonresidential construction spending is up by nearly 3 percent on a year-over-year basis. Certain segments are red hot, including the office and lodging segments, both of which have experienced more than 20 percent spending growth over the past 12 months. Investors, both domestic and global, continue to search for deals during a period of low global interest rates. Commercial real estate has emerged as one of the favorite destinations for investor capital, helping to raise property values and prompt significant numbers of construction starts.

“While certain private segments flourish, publically financed categories continue to languish,” said Basu. “This is particularly true in the public safety, conservation and development and sewage and waste disposal categories, all of which have seen year-over-year spending declines of 6.5 percent or more. The outcome of the election has lifted expectations for spending in many publically financed categories. Both major presidential candidates had discussed investing in infrastructure during their campaign. However, there was a conventional wisdom suggesting that divided government would be the most likely outcome, which would likely have translated into more stalemates and less infrastructure spending. With one party now controlling the U.S. Senate, U.S. House of Representatives and the White House, a meaningful infrastructure package may be more likely. While that will not affect spending numbers in the immediate near term, the longer-term outlook for infrastructure spending has brightened considerably since our previous report.

“In addition to the promise of augmented infrastructure spending, there are indications of corporate and personal tax cuts to come, increased defense spending, deregulation of the financial system, and lighter regulation of energy producers,” said Basu. “All of these policy shifts are consistent with greater construction spending going forward, at least for the foreseeable future. In other words, the 2017-18 nonresidential spending outlook has improved over the last several weeks. It remains to be seen how much the president-elect can accomplish over the next few months, and what affect that will have on the nonresidential construction segment of the U.S. economy.”

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Associated Builders and Contractors Congratulates President-elect Trump

1291931472167356058Associated Builders and Contractors (ABC) today released the following statement on the election of Donald Trump as president of the United States.

“Associated Builders and Contractors congratulates President-elect Donald Trump and Vice President-elect Mike Pence and looks forward to working with this administration to craft policies rooted in free enterprise that will encourage open competition and result in greater business investment and more construction jobs,” said ABC President and CEO Michael Bellaman. “With his background in real estate and development, Trump is very familiar with the obstacles to economic growth ABC members face, including our broken regulatory system, the increasingly difficult challenge of finding affordable health care coverage for employees, a growing shortage of appropriately skilled labor and the highest effective tax rate of any industry. We are hopeful that Trump will select judicial nominees that respect the traditional principles of separation of powers, and we urge his administration to implement policies that guarantee a fair and level playing field for all contractors, regardless of labor affiliation, such as prohibiting the government from mandating discriminatory project labor agreements.”
Associated Builders and Contractors (ABC) is a national construction industry trade association established in 1950 that represents nearly 21,000 members.