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AGC's Data DIGest: November 10-20, 2015

More states add construction jobs in October; construction price and cost PPIs diverge

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Seasonally adjusted construction employment rose in 43 states and the District of Columbia from October 2014 to October 2015 and declined in seven states, an AGC analysis of Bureau of Labor Statistics (BLS) data released today showed. The number of places with year-over-year (y/y) gains was the most since February. California again added the most construction jobs (49,800 jobs, 7.3%), followed by New York (21,900, 6.4%) and Florida (18,700, 4.6%). Arkansas again had the steepest percentage gain (18%, 8,200 jobs), followed by Idaho (12%, 4,400), Kansas (12%, 6,900) and Nevada (11%, 7,100). The steepest percentage losses again occurred in West Virginia (-17%, -5,800) and Rhode Island (-5.6%, -900), followed by Minnesota (-3,800, -3.5%) and Indiana (-2.0%, -2,400). The largest losses occurred in West Virginia, Minnesota and Indiana. For the month, there were gains in 35 states, losses in 13 and no change in Arkansas, Nevada and D.C.

The producer price index (PPI) for final demand declined 0.3% in October and 1.6% y/y, BLS reported on November 13. AGC posted tables and an explanation 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 1.0% in October and 2.3% y/y. 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—also climbed 2.3% since October 2014. The 12-month increases ranged from 1.6% for healthcare construction to 1.9% for industrial buildings, 2.2% for schools, 2.3% for warehouses and 2.8% for offices. PPIs for new, repair and maintenance work on nonresidential buildings fell 0.8% for plumbing contractors from October 2014 to October 2015 and rose 1.6% for roofing contractors, 3.9% for concrete contractors and 5.6% for electrical contractors. An expanded set of PPIs for inputs to construction—excluding capital investment, labor and imports—adds services to the previous PPI for 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 slid 0.3% from September to October, as the index for energy declined 1.8%, goods less food and energy was flat, and services fell 0.4% for the month. The PPI for all goods used in construction fell 4.6% y/y. Materials important to construction that had notable one- or 12-month price changes include diesel, up 3.4% for the month but down 39% y/y; steel mill products, -1.7% and -16%, respectively; copper and brass mill shapes, -0.8% and -13%; aluminum mill shapes, -0.3% and -11%; lumber and plywood, 0 and -9.2%; paving mixtures and blocks, -0.3% and -5.6%; flat glass, 0.3% and 6.0%; and cement, 0 and 6.3%.

The value of nonresidential construction starts, not seasonally adjusted, slipped 3.4% from October 2014 to October 2015 but rose 5.2 % YTD, CMD (formerly Reed Construction Data) reported on November 13, based on data it collected. Building starts edged down 0.3% YTD, with institutional down 4.9%; commercial down 1.2%; and industrial up 48%. Heavy engineering starts rose 15%, led by an 11% gain for road/highway starts.

The Architecture Billings Index (ABI) October score was 53.1, down slightly from 53.7 in September (any score over 50 indicates billings growth), the American Institute of Architects reported on Wednesday. The index measures the percentage of surveyed architecture firms that reported higher billings than a month earlier less the percentage reporting lower billings. Based on three-month moving averages, firms with every type of practice specialty had positive scores: commercial/industrial, 55.1, up from 52.0; mixed, 54.9, up from 52.9; multifamily residential, 52.5, up from 51.2; and institutional, 51.4, unchanged.

Housing starts slipped 1.8% from October 2014 to October 2015 (y/y) but climbed 10% YTD, the Census Bureau reported on Wednesday. Single-family starts fell 2.4% y/y but rose 10% YTD. Multifamily (buildings with 5 or more units) starts declined 8.4% y/y but increased 11% YTD. Building permits, a fairly reliable predictor over time of near-term starts, especially single-family, increased 2.7% y/y and 12% YTD overall, with single-family permits rising 9.0% and 8.6%, respectively, and multifamily down 7.1% y/y but up 17% YTD. Multifamily permits YTD (369,000) far exceed starts (323,000), suggesting more projects may begin soon. Single-family permits YTD (589,000) trail starts (608,000).

Two other reports this week suggest continuing strength for multifamily construction. The National Association of Home Builders reported on Thursday that in the third quarter its Multifamily Production Index "increased one point to a level of 56. This marks the 15th consecutive quarter with a reading of 50 or above, which indicates that more respondents report conditions are improving than report conditions are becoming worse....Also in the third quarter, the Multifamily Vacancy Index (MVI), which measures the multifamily housing industry's perception of vacancies, increased five points to 39. A higher number indicates more vacancies. After peaking at 70 in the second quarter of 2009, the MVI improved consistently through 2010 and has been fairly stable since 2011."

Freddie Mac reported on Wednesday that its quarterly survey of renters found "renters in single-family properties are dissatisfied with renting, and are more likely to purchase a home in the next three years than multifamily renters (57% vs. 28%)," implying that much of the demand for single-family houses will come from single-family renters, not people moving out of multifamily housing. Among "satisfied renters," 70% say they "are likely to continue renting for the next three years."

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.