PPIs remain calm overall but rise for finished buildings; oil-by-rail niche mushrooms
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The producer price index (PPI) for final demand slid 0.3%, not seasonally adjusted (-0.2%, seasonally adjusted), in May and rose 2.0% over 12 months, the Bureau of Labor Statistics reported Friday. AGC posted an explanation and tables focusing on construction prices and costs. Final demand includes goods, services and five types of nonresidential buildings that BLS says make up 34% of total construction. There are no indexes yet for other building types, residential or nonbuilding construction. The PPI for final demand construction, not seasonally adjusted, rose 0.1% in May and 3.2% over 12 months. The overall PPI for new nonresidential building construction—a measure of the price contractors say they would charge to build a fixed set of five categories of buildings—increased 0.1% for the month and 3.3% since May 2013. The PPI for new warehouse construction (11% of the index for new nonresidential buildings) slipped 0.1% in May and rose 1.9% over 12 months. The PPIs for offices (34% of the total) rose 0.1% and 3.1%, respectively; the indexes for industrial buildings (13% of the total) and health care buildings (16% of the total) each climbed 0.1% and 3.6%; and schools (26% of the total), 0.1% and 3.9%. PPIs for new, repair and maintenance work on nonresidential buildings by electrical contractors rose 0.1% and 1.7%; roofers, 1.5% and 3.6%; plumbing contractors, 0 and 4.6%; and concrete contractors, 0 and 1.3%. The PPI for inputs to construction—an average of the cost of all materials used in construction plus items consumed by contractors, such as diesel fuel—was flat in May and up 1.6% over 12 months. Major construction materials with notable one- or 12-month price swings included hot-rolled structural steel shapes, -1.2% and 11%, respectively; and insulation materials, -0.8% and 8.4%.
Consultancy Rider Levett Bucknall (RLB) reported last Monday that its National Construction Cost Index increased 1.15% in the first quarter of 2014, the most since mid-2008, based on data it collected in 12 cities. The increase accelerated slightly from 1.0% in the last quarter of 2013 and totaled 3.7% over the past four quarters. City-specific increases for the quarter ranged from 3.8% in Honolulu to 0.6% in Las Vegas. The index “tracks the ‘true’ bid cost of construction, which includes, in addition to costs of labor and materials, general contractor and subcontractor overhead costs and fees (profit). The index also includes applicable sales/use taxes that ‘standard’ construction contracts attract.”
Construction of rail facilities to transport crude oil is an active niche, the Energy Information Administration’s Today in Energy e-newsletter reported last Tuesday. “Enbridge's Eddystone Rail facility, located outside Philadelphia, began operating in May 2014. [On the West Coast, several] large unloading facilities are planned to come online in the next few years: Tesoro…has proposed a 360,000 [barrels per day] facility at the Port of Vancouver, [Washington.] In addition, several new unloading terminals are planned to open in 2014 and 2015, with most of the unloading capacity in California and Washington….new rail terminals have been built to transport crude oil production from the Niobrara Shale formation in Colorado and Wyoming, and the Permian Basin in West Texas and southeastern New Mexico.…Rangeland Energy last month began construction on its RIO Hub rail loading terminal in Loving, New Mexico. This terminal is scheduled to begin operating later this year, with the project's developers expecting to eventually raise its capacity to 100,000” barrels per day.
Tech companies in California are building offices in both the city and the suburbs, “sorted by the young vs. not-so-young, creative vs. technical workers and software vs. hardware firms,” the Wall Street Journal reported last Wednesday. “While some brokers contend that larger companies are picking the suburbs because space is abundant, almost all acknowledge that the age of workers they are recruiting also is a big factor….Younger workers—those under 30—don’t like the way existing Silicon Valley offices are designed. [Even] for older workers, ‘Silicon Valley can sometimes feel like it’s out in the middle of nowhere,’ says Amber Schiada, research manager for JLL’s Northern California region. That has encouraged developers to design new campuses that serve as mini urban centers. Cafeterias, indoor collaborative spaces and outdoor work areas are typical features, according to Ms. Schiada.” These trends are likely to affect construction in other regions, too.
Last Wednesday, the Bureau of Economic Analysis released advance estimates of 2013 inflation-adjusted gross domestic product (real GDP) by state, including each industry’s contribution to the total. “An industry's GDP by state, or its value added, in practice, is calculated as the sum of incomes earned by labor and capital and the costs incurred in the production of goods and services. That is, it includes the wages and salaries that workers earn, the income earned by individual or joint entrepreneurs as well as by corporations, and business taxes such as sales, property, and Federal excise taxes—that count as a business expense.” For construction, GDP represents the earnings of the workers and owners of businesses in the state—not the value of structures put in place, which includes purchases of materials and services. The industry’s share of state GDP ranged from 5.7% in Mississippi and 5.5% in Hawaii to 3.0% in Connecticut and Michigan and 2.8% in Delaware (and 1.1% in the District of Columbia). Construction accounted for 3.7% of U.S. GDP.
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