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AGC's Data DIGest: April 19-22, 2016

Building products volumes rise, results vary for prices; nonresidential starts increase

Editor’s note: Construction Citizen is proud to partner with AGC America to bring you AGC Chief Economist Ken Simonson's Data DIGest. Check back each week to get Ken's expert analysis of what's happening in our industry.

Securities research firm Thompson Research Group on April 12 released its quarterly building products survey of select manufacturers and distributors with more than 300 locations nationwide "on the state of the residential and nonres[identical] construction end markets....A common theme from all contacts was...a tight labor market along the value chain (truck driver shortages to drywall installers)....Overall nonres volumes are projected to be up mid-to-high single digits, depending upon the industry contact. Earlier construction value chain feedback is for 6-8% [increase in] volumes...Other contacts with a wider range of early and later cycle nonres products cite a...4-6% range. Healthcare end market remains strong, and office growth is also driving demand. Not surprisingly, industry contacts confirm that the multifamily end market growth rates are likely to slow in 2016 [to] (small single digits growth). That said, starter single-family home growth has shown momentum improvement. Major steel stud companies announced a price increase of 10% for mid-April...but vast majority of the survey respondents reported skepticism toward the increase....Based on feedback from industry contacts, we think the [April 10-15% wallboard] price increase will likely be largely unsuccessful; certain regions (i.e., ones with tighter capacity utilization levels) will see greater pricing leverage versus other regions [such as Texas, Florida and California]....Acceptance of the January residential insulation price increase has been mixed, although the nonres insulation price increase appears to have been accepted. As a reminder, a high single-digit to low double-digit insulation price increase was implemented in January."

Price increases are continuing for some products important to construction. On Monday, the Energy Information Administration reported that the national average retail price of on-highway diesel fuel was $2.165 per gallon, an increase of 18.5 cents from the weekly low set on February 15, but still 61.5 cents (22%) below the year-ago price. On April 12, Wire Mesh Corp. informed customers, "we were notified of another wire rod increase from most all of our wire rod suppliers. Most of the manufacturers have been consistent raising the price $50.00 per ton with all SHIPMENTS, (not orders) shipped on or after May 1st. In addition to these notifications, we are expecting more increases as well."

The value of nonresidential construction starts, not seasonally adjusted, increased 9.8% year-to-date (YTD) for January-March combined compared with the same months of 2015, CMD reported on April 12, based on data it collected. The value of nonresidential building starts rose 11.8% YTD and heavy engineering starts climbed 5.8%.

Housing starts slumped 8.8% at a seasonally adjusted annual rate from February to March but gained 15% YTD, the Census Bureau reported on Tuesday. Single- and multifamily (buildings with 5 or more units) starts each slid 9% for the month. Single-family starts climbed 22% YTD while multifamily starts declined 0.6%. Building permits, a fairly reliable predictor over time of near-term starts, especially single-family, fell 7.7% for the month but rose 7.1% YTD. Single-family permits dipped 1.2% for the month but rose 14% YTD. Multifamily permits dropped 21% and 5.0%, respectively. Nevertheless, YTD multifamily permits (84,700) continued to outpace starts (71,700), suggesting more projects may begin soon.

The Architecture Billings Index (ABI) score rose to 51.9, seasonally adjusted, in March from 50.3 in February (any score over 50 indicates billings growth), the American Institute of Architects reported on Wednesday. The ABI measures the percentage of surveyed architecture firms that reported higher billings than a month earlier less the percentage reporting lower billings. Firms with different practice specialties varied (based on three-month moving averages): multifamily residential, 55.4, up from 53.0 in February; commercial/industrial, 51.8, down slightly from 52.3; mixed practice, 50.0, up from 49.0; and institutional, 48.0, nearly unchanged from 48.1.

Spending on several natural gas infrastructure projects has been canceled or delayed by regulators or investors. Pipeline operator Kinder Morgan announced on Wednesday that it "suspended" plans to build a $3.3 billion natural gas pipeline from Wright, N.Y., to Dracut, Mass. On Tuesday, Northwest Innovation Works announced it would not go ahead with a proposed methanol plant in Tacoma, Wash. On April 15, Oregon LNG Project announced "it is ceasing operations immediately" instead of building a $6 billion pipeline and liquefied natural gas (LNG) terminal at the mouth of the Columbia River. And on March 11, the Federal Energy Regulatory Commission denied an application to build a pipeline and LNG terminal in Coos Bay, Ore., although the project owners have appealed the decision, radio station KSOR reported on April 11. Nevertheless, an AGC analysis of Census construction spending data shows that oil and gas construction (pipelines and field projects) increased 10% YTD in the first two months of 2016.

On Thursday, the Census Bureau issued its annual County Business Patterns report for 2014, "which provides the only detailed annual information on the number of establishments, employees, and first quarter and annual payroll for nearly 1,200 industries at the national, state, county and congressional district levels." In an accompanying press release, Census noted, "San Francisco's employment grew 5.7% (up 30,931 employees) to 573,297 employees in 2014. The information sector..., up 13.6% to 56,684 employees, and the construction sector...,up 10.4% to 17,884 employees led growth in that county."  Travis County, Texas (Austin) tied San Francisco for the largest percentage gain in employment among the 50 counties with the most employees.

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