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The producer price index (PPI) for final demand in September, not seasonally adjusted, increased 0.3% from August and 2.6% year-over-year (y/y) from September 2017, the Bureau of Labor Statistics (BLS) reported on Wednesday. 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 31% of total construction. The PPI for new nonresidential building construction—a measure of the price that contractors say they would charge to build a fixed set of buildings—climbed 0.1% for the month and 3.5% y/y. Increases ranged from 2.8% y/y for warehouses to 3.1% for schools, 3.6% for health care buildings, 3.7% for industrial buildings and 4.0% for offices. Increases in PPIs for subcontractors' new, repair and maintenance work on nonresidential buildings ranged from 1.0% y/y for roofing contractors to 3.0% for plumbing contractors, 4.3% for electrical contractors and 4.4% for concrete contractors. The PPI for inputs to construction—excluding capital investment, labor and imports—comprises a mix of goods (56%) and services (44%). This index increased by 0.2% for the month and 6.2% y/y, topping the 3.5% PPI increase for inputs to new nonresidential building construction and implying a continuing cost squeeze for contractors. Increases for inputs to seven nonresidential structure types ranged from 4.5% for industrial structures to 7.5% for highways and streets. PPIs for inputs to new residential structures rose 6.0% y/y for single-family and 6.3% for multifamily. The PPI for services inputs to construction rose 4.7%, while the index for goods inputs (including items consumed by contractors, such as diesel fuel) climbed 7.4% (18% for energy and 5.6% for goods less food and energy). Inputs important to construction that had large one- or 12-month price changes include diesel fuel, up 4.4% in September and 29% y/y; steel mill products, unchanged for the month but up 18% y/y; aluminum mill shapes, -0.3% and 11%, respectively; asphalt paving mixtures and blocks, 0.6% and 11%; asphalt felts and coatings, 2.7% and 9.2%; gypsum products, -0.5% and 7.9%; truck transportation of freight, 0.4% and 6.7%; lumber and plywood, -1.2% and 5.5%; insulation materials, 1.7% and 5.4%; and copper and brass mill shapes, -1.0% and -8.9%.
While some prices moderated in recent months from peaks earlier in the year, the September PPIs were collected before 10% tariffs were placed on thousands of Chinese goods, including many used in construction, and before reconstruction and replacement began on damage from Hurricanes Florence and Michael. These impacts are likely to drive up costs for many materials and services. AGC posted a primer on the tariffs. One reader forwarded several letters from flooring suppliers announcing price increases to match the 10% tariff on Chinese flooring that took effect on September 24 and noting that those tariffs are scheduled to jump to 25% on January 1. Readers are invited to send examples of price changes, project delays and cancellations, and other impacts of storms, trade actions, interest rate moves or labor issues to firstname.lastname@example.org.
Nonfarm payroll employment in September increased by 134,000, seasonally adjusted, from August and by 2,537,000 (1.7%) y/y, the BLS reported on October 5. The unemployment rate fell from 3.9% in August to a 49-year low of 3.7%. Construction employment rose by 23,000 for the month and 315,000 (4.5%) y/y to 7,286,000 (the most since May 2008 but 5.7% below the April 2006 peak).Average hourly earnings in construction topped $30 per hour for the first time, rising 3.1% y/y to $30.18, or nearly 11% more than the private-sector average ($27.24, up 2.8% y/y). The unemployment rate in construction, not seasonally adjusted, fell from 4.1% in September 2017 to 3.4%, the lowest September rate since the series began in 2000. The number of unemployed jobseekers whose last job was in construction fell to 412,000 from 433,000 in 2017.
Construction spending totaled $1.318 trillion at a sesonally adjusted rate in August, up 0.1% from the upwardly revised July rate and up 6.5% from August 2017, the Census Bureau reported on October 1. Public construction jumped 2.0% for the month and 14% y/y. Of the three largest public segments, highway and street construction rose 1.7% for the month and 14% y/y; educational construction, 1.0% and 3.5%, respectively; and transportation, -0.7% and 24% (46% y/y for state and local airport construction and 9.9% for other public transportation—port, transit and passenger rail).Private nonresidential construction spending dipped 0.2% for the month but increased 4.8% y/y. Of the four largest components, power (electric power plus oil and gas pipelines and field structures) fell 1.3% for the month but rose 6.2% y/y; commercial, -0.9% and 3.1%, respectively (with retail, -2% y/y, and warehouse, 11% y/y); office, 0.8% and 13%; and manufacturing, -0.7% and -1.2%. Private residential spending slipped 0.7% in August but increased 4.0% y/y. New multifamily construction decreased 1.7% for the month and 0.6% y/y; new single-family construction, -0.7% and 4.2%, respectively; and residential improvements, 0.6% and 5.3%.
The value of construction starts in September, not seasonally adjusted, tumbled 26% y/y from September 2017, data provider ConstructConnect reported on Thursday, while year-to-date starts for the first nine months of 2018 combined declined 7.1% from the same period in 2017. Nonresidential building starts plunged 37% y/y and 10% year-to-date. Civil (heavy engineering) starts fell 20% y/y but rose 6.3% year-to-date. Residential starts slumped 16% y/y and 10% year-to-date.
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