PPI falls overall, edges up for construction; automakers announce new plants
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The producer price index (PPI) for final demand decreased 0.3%, not seasonally adjusted (-0.4%, seasonally adjusted), in April and 1.3% over 12 months, the Bureau of Labor Statistics (BLS) reported on Thursday. 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. The PPI for final demand construction, not seasonally adjusted, rose 0.1% in April and 1.7% over 12 months. The overall PPI for new nonresidential building construction—a measure of the price that contractors say they would charge to build a fixed set of five categories of buildings—climbed 1.8% since April 2014. The 12-month increases ranged from 0.6% for healthcare construction to 1.6% for schools and warehouses, 1.7% for industrial buildings and 2.3% for offices. PPIs for new, repair and maintenance work on nonresidential buildings by plumbing contractors dipped 0.1% over 12 months, while PPIs for roofing contractors rose 2.3%; electrical contractors, 2.4%; and concrete contractors, 2.9%. An expanded set of PPIs for inputs to construction, excluding capital investment, labor and imports, adds services to the previous construction industries, goods (formerly called inputs to construction industries). Goods constitute 60% of the index (including 7% for energy); services, 40% (trade services, 25%; transportation and warehousing services, 4%; other services, 10%). The overall PPI for inputs to construction slipped 0.1% from March to April, as one-month declines of 2.1% in the indexes for energy and 0.3% for services outweighed a rise of 0.2% in the index for goods less food and energy. The PPI for all goods used in construction declined 4.0% over 12 months. Materials important to construction that had notable one- or 12-month price changes include diesel, down 5.6% for the month and 42.5% over 12 months; steel mill products, -3.4% and -8.7%, respectively; concrete products, 1.4% and 5.1%; and cement, 2.3% and 7.5%.
Automobile manufacturers have announced several new large construction projects recently. "Volvo Car Group will set up its first North American auto factory in South Carolina, investing $500 million," Bloomberg News reported on Monday. "The plant is slated to start operating in 2018 and eventually have capacity to make 100,000 autos a year with 4,000 employees. [BMW's factory in Spartanburg] will become BMW's largest production site worldwide next year after a $1 billion expansion." In March, Mercedes-Benz announced a $500 million expansion to its plant in North Charleston, S.C. General Motors (GM) announced on May 4 that it would invest another $174 million into the Fairfax Assembly Plant in Kansas City, Kan. GM "said it will create 650 new jobs as it invests $5.4 billion into U.S. plants through 2017, including a total of $783.5 million at three Michigan sites," the Detroit News reported on April 30. A company spokeswoman "said there will be several facilities involved in the total investment — including additional sites in Michigan." Reuters reported on May 8, "Fuji Heavy Industries Ltd, the maker of Subaru cars, [said it] now plans to add 66,000 vehicles of annual output capacity at its U.S. plant by the end of 2016, four years ahead of schedule," although it did not specify any construction expenditures.
Warehouses are being built taller and larger. "Real-estate firm Prologis Inc.'s latest project, a one-million-square foot warehouse in Tracy, Calif., will boast a 40-foot-high ceiling, 25% taller than the typical 32 feet," the Wall Street Journal reported on Wednesday. "Will O'Brien, president of Sedlak Management Consultants, a supply-chain consultancy, [said,] "One million square feet, or even 1.2 million or 1.4 million are still considered big, but they're not unusual anymore."
"Increases in the size of commercial buildings have outpaced increases in the number of those buildings over the past decade," the Energy Information Administration (EIA) reported on May 8 in an online "Today in Energy" column that discussed EIA's Commercial Buildings Energy Consumption Survey (CBECS). "CBECS is the only nationally representative data collection for building characteristics and energy use in commercial buildings. Information about the commercial building stock in 2012 is now being released, and energy-use information is expected later this year. CBECS estimates that there were 5.6 million commercial buildings in the United States in 2012, totaling 87 billion square feet of floorspace. This level represents a 14% increase in the number of buildings and a 21% increase in floorspace since 2003, the last year for which CBECS results are available. Newer buildings tend to be larger than older buildings. The average size of buildings constructed before 1960 (26% of the commercial building stock) is 12,000 square feet; buildings constructed between 1960 and 1999 (55%) average 16,300 square feet; and buildings constructed in the 2000s (18%) average 19,000 square feet. Average building size has increased within a few building types in particular, reflecting changes in consumers' needs and wants. Four building types showed a statistically significant increase in building size when comparing buildings built before 1960 with those constructed in the 2000s: Health care buildings are getting larger, most likely to meet the needs of a population whose average life expectancy continues to increase. The size of lodging buildings increases substantially across vintages. Growing numbers of both leisure and business travelers led to the construction of larger hotels. Retail (other than shopping mall) buildings—a subset of the mercantile category, which includes malls—are larger, likely a result of the trend toward big-box stores. Religious worship buildings are also larger, possibly attributable to a growing number of megachurches, which have become more popular in the United States over the past two decades."
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