Weekly Grind: Biggest Construction Award Winners and New Equipment to Hit the Market
States face flooding, other problems in Midwest amid storms
U.S. Home Construction Jumps Nearly 10 Percent in January
Trump's Plan to Rebuild US Roads Relies on Local Dollars
How OSHA Is Trying to Catch Up
Automation in the Construction Industry
Smart Buildings Continue Their Rise in 2018
Seattle Eyes Taller, Denser in Affordable Housing Proposal
By Bassem Hamdy
November 28, 2016
As of Monday, November 28 our national Construction Health Indicator score is 83.2 – a two point drop from last week.
The strongest contributor is Investments remaining solid at 97.
The national Labor score is solid at 88.4.
The National Commodities & Materials Indicator is up four points from last week, at 64.
It’s no secret that our nation’s infrastructure is crumbling—literally, in some cases. The American Society of Civil Engineers gives US infrastructure a D+, and estimates the country would have to invest $3.6 trillion to patch it all by 2020. With grand scale infrastructure plans on the horizon, our industry will continue to move towards a perfect investments score. However, in the near term the most pressing economic challenge for construction remains the depressed labor market.
Our investments score continues to lead the charge in a strong overall Health Indicator score – increasing by one point to 97 this week. This is mostly led by the much needed increase of housing starts and confidence in future infrastructure.
Currently, we are experiencing the lowest value of total public construction spending in the past year. Most recently, publicly funded construction dropped 0.9 percent to an annual rate of $270.3 billion. Over the past 12 months, government construction has slumped 7.8 percent - a decline equal to nearly $23 billion.
However, since the election stock prices have soared, reflecting confidence in future government backed infrastructure. It is estimated that putting just $18 billion a year into roads, bridges, and waterways could create a $29 billion jump in GPD and more than 200,000 jobs, according to the Economic Policy Institute. Non-government players may well move faster and more efficiently than government agencies, and thus it is possible that private investments could grow in 2017. Considering current low interest rates, this could be a good investment for the private sector. However, a concrete plan for incentives to invest in such projects remains to be seen.
Meanwhile, amid high demand for single family homes, figures for housing starts are at the highest levels observed in the past year – 88.5% lower than the all-time high value.
Although the national labor score remains solid at 88, the labor shortage remains a problem across the country. According to the Associated General Contractors, 69% of construction firms are struggling to fill hourly craft positions. This comes at a time when the future administration has promised to put people to work with a $1 trillion infrastructure stimulus.
As of October 2016, the national unemployment rate was a mere 5.7% with 6.68 million people employed in construction – the largest monthly total recorded in the past year. However, as we continue to move towards full employment these workforce shortages are not going to go away in the near future.
Meaning, the potential to undermine broader economic growth by forcing contractors to slow scheduled work or choose not to bid on projects could inflate the future cost of construction. We are already seeing this reflected in recent wage increases needed to recruit and keep construction workers. The average hourly wage increased 0.3% during October 2016. It has risen over each of the past 10 months and grown a total of 2.9% since December 2015.
Meanwhile, construction backlog for large contractors remains at a peak of 14.06 months, according to the Associated Builders and Contractors Construction Backlog Indicator. Nationally, the average backlog fell to 8.5 months, down 1.6 percent from the last year. Overall, the Construction Backlog Indicator remained virtually unchanged on a year-over-year basis, signaling that growth in the nation’s non-residential market is slowing.
This week commodities experienced the largest dip since last week – seven points – which is mainly due to the high producer price index of concrete, and growth in lumber futures. According to the U.S. Bureau of Labor Statistics, after rising 0.3% in September, the economy-wide PPI was unchanged last month. Meanwhile, input prices are just 0.5% higher than this time last year. The rise in prices for goods can mainly be attributed to a 2.5% increase in energy prices.
Prices received for ready-mix concrete declined by 0.1%, but is still valued at 254.6 – the highest value on record. This number is 1.4% higher than the average value observed in the past year.
The producer Price index for softwood lumber declined 1.2% this month, while the Chicago Mercantile Exchange lumber futures grew 20.1% in the past year. Amid uncertainties in our nation’s future international trade agreements, a strengthening U.S. dollar makes Canadian softwood lumber cheaper to import, which may prove increasingly important as softwood lumber litigation picks up in the coming months.
Further currency appreciation appears on the horizon as Federal Reserve officials signal that they will raise the U.S. benchmark interest rate in December. As a result, the price of certain inputs—such as iron, steel, copper, plumbing fixtures, and nonferrous wire and cable—will begin to rise more rapidly during the coming months while fuel price increases remain stable. However, Procore’s Chief Economist Anirban Basu suggests that “a still sputtering global economy will help put a lid on construction input price inflation, suggesting that contractors should not be deeply concerned by prospects for rapid input price increases, at least not yet.”
That’s all we have for now. Keep building and we’ll keep crunching the numbers. Check back here daily as numbers refresh and we’ll continue to translate this into meaningful digests that will help you make informed decisions all week long.
Click here for recaps from Construction Health Updates from past weeks.
Want these weekly updates emailed to you right when they’re published? Hit the orange SUBSCRIBE button at the top right corner of the page!
Procore Construction Health Indicator
Daily Drill: TESLA's Solar Rewrite, LA Evolves
Take a look at some of the various ways that climate change will be affecting the construction industry in the distant future and find out what you can do about it. Read More
If you're a construction worker, you're most likely working physical labor and it can get hot if you're working under the sun. Here's a guide for h... Read More
Pete says that Procore quickly breaks down the complicated pieces of data in his jobs, and presents them to the end user in a digestible format. "T... Read More
Hear Brad Hyatt, Associate Professor at California State University Fresno, discuss what students are learning in school to prepare them for const... Read More
Ever wonder what’s the difference between a general contractor and construction manager? Well, you’re not alone! To help clear up any confusion, we... Read More
Construction has always had a somewhat complicated relationship with technology. Over the last few decades there have been improvements in material... Read More
J. Colin Cagney, a director, KPMG Major Projects Advisory, knows that while most companies want to use data analytics to increase, they’re often no... Read More