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AGC's Data DIGest: Aug. 26 – Sept. 4, 2013

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Construction spending hits four-year high; AGC survey finds challenges filling positions

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Construction spending in July reached a four-year high of $901 billion at a seasonally adjusted annual rate, up 0.6% from June and up 5.2% from July 2012, the Census Bureau reported on Tuesday.  Census revised up the totals for June and May by $12 billion and $7 billion, respectively, which may lead to an upward revision in the second-quarter estimate for growth in gross domestic product (GDP) later this month.  Private residential spending increased 0.6% for the month and 17% year-over-year.  Private nonresidential spending rose 1.3% and 2.0%, respectively.  Public construction spending fell 0.3% and 3.7%.  Of the three residential components, new single-family construction grew 0.5% and 29%; new multifamily spending, 0.1% and 39%; and improvements to existing single- and multifamily buildings, 0.8% and 1.4%.  The three largest private nonresidential components (in descending order of current size) all increased from one and 12 months ago: power construction (including conventional and renewable power plus oil and gas fields and pipelines) 0.5% and 5.0%, respectively; manufacturing construction 2.9% and 0.8%; and commercial (new and renovated retail, warehouse and farm), 1.7% and 2.6%.  The fastest-growing private nonresidential segment was lodging, up 6.1% and 33%.  Of the top two public categories, highway and street construction slipped 1.1% and 3.8%, while educational fell 1.5% and 12%.

Of the 686 respondents to a member survey that AGC released yesterday, 81% report having a hard time filling positions of one kind or another: 74% report challenges filling craft worker positions, while 53% are having a hard time filling at least some professional positions.  Among firms that are having a hard time filling professional positions, 49% report challenges filling project manager/supervisor spots while 35% report having a hard time filling estimator positions.  Meanwhile, construction firms are having the hardest time finding the following types of craft workers: laborers (35%), carpenters (34%) and equipment operators (31%).

Real (net of inflation) GDP increased 2.5% at a seasonally adjusted annual rate in the second quarter, the Bureau of Economic Analysis (BEA) reported last Thursday, faster than the 1.7% “advance” estimate in July.  Real private investment in nonresidential structures (including wells and mines) climbed 16% (revised from 6.8%).  Real residential investment rose 13% (as previously estimated).  Real government investment in structures fell 7.4% (revised from 0).  The price index for private nonresidential structures posted a 5.3% rise (revised from 4.8%).  The price index for residential investment rose 5.0% (revised from 5.7%).  The price index for government investment climbed at a 2.3% rate (unchanged).

Informal soundings of businesses in the 12 Federal Reserve districts “suggest that national economic activity continued to expand at a modest to moderate pace during the reporting period of early July through late August,” the Fed reported on Wednesday in the latest Beige Book, so named for the color of its cover.  “Several districts, including Philadelphia, Richmond, Atlanta, Chicago, Kansas City and San Francisco, expressed that demand for inputs related to autos, housing and infrastructure were strong....  In the Richmond district, a lumber company purchased new equipment to expand its production; and in Chicago, demand for construction equipment and materials continued to strengthen.  Philadelphia reported some increased demand related to ongoing repairs of infrastructure damaged during Superstorm Sandy last year.  Reports from San Francisco indicated that shipments of steel products used in nonresidential construction continued to increase, and reports from Chicago indicated that steel output grew at a moderate pace....  Single-family home construction was strong in the Minneapolis and Dallas districts, and Chicago reported that a number of builders are planning new developments to begin later this year.  However, several districts noted constraints on the construction of single-family homes.  San Francisco pointed to shortages of construction workers.  In the Kansas City district, some building materials, such as drywall and roofing shingles, were in short supply.  [The Dallas and Minneapolis] districts reported new plans for construction of industrial space…. The Boston, Philadelphia, Cleveland, Atlanta, Dallas and San Francisco districts all reported increases in construction of multifamily residential properties….  St. Louis reported increases in employment at a variety of manufacturing firms connected to the auto industry or the home construction industry….  Cleveland and Dallas highlighted that, overall, wage pressures at homebuilding and other construction-related firms were contained….  Reports from a few districts highlighted significant labor supply constraints and, in some cases, large compensation increases for workers with specialized skills in selected sectors, including the construction and high-technology sectors in Atlanta and Kansas City and the engineering sector in Dallas….  In a few districts, prices of some construction inputs in short supply increased, including lumber, drywall, concrete and roofing shingles.  However, Cleveland noted that the rate of increase for construction input prices slowed, and lumber prices in the Chicago district declined….  Richmond reported that several construction-related businesses said that they were able to pass along rising input prices.”

The Data DIGest is a weekly summary of economic news; items most relevant to construction are in italics. All rights reserved. Sign up at www.agc.org/datadigest.

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