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AGC Data DIGest: May 12-17, 2021

Materials costs rise at record pace in April, with further increases likely; job openings jump in March

The producer price index (PPI) for nonresidential building construction—a measure of the price that contractors say they would charge to build a fixed set of buildings—increased 1.2% from March and 2.3% year-over-year (y/y) since April 2020, while the PPI for material and service inputs to new non-residential construction jumped 1.5% and 17.6%, respectively, the Bureau of Labor Statistics (BLS) reported on Thursday. An index that measures the price of goods inputs to all construction soared 2.0% for the month and 19.1% y/y, the largest y/y increase in the 35-year history of the series. AGC posted tables and charts showing PPIs relevant to construction. PPIs that contributed to the input increases include diesel fuel, which tumbled 8.0% in April but shot up 127% y/y; lumber and plywood, up 6.5% for the month and 86% y/y; steel mill products, 18% and 64%, respectively; copper and brass mill shapes, 0.2% and 49%; aluminum mill shapes, 7.5% and 20.5%; plastic construction products, 3.3% and 14%; gypsum products, 3.9% and 12%; truck transportation of freight, 0.5% and 9.2%; asphalt felt and coatings, 1.4% and 6.6%; and insulation materials, 0.1% and 5.2%.

Readers forwarded a variety of additional price-increase notices that had received, implying further increases in producer prices in May and June. A ready-mix concrete supplier in Texas announced an increase of $5 per cubic yard, effective June 1 and warned of possible shortages. Johns Manville Roofing Systems warned customers on May 7 that, as a result of lengthening and uncertain rail and trucking delivery times, it would “not accept, process, or confirm any new orders until May 24.” A contractor based in Wisconsin reported, medium-density fiberboard “prices are skyrocketing and we have no idea when we will be getting more product……Shortages and allotments in addition to non-stable pricing are being felt with nearly every product.” Readers are invited to email information about construction costs and supply-chain issues to ken.simonson@agc.org.

Copper futures on the CME’s Comex exchange, lumber futures and steel price indexes again reached new peaks. In a favorable sign for availability, the American Chemistry Council reported on Friday, “With further restarts (from the shutdowns associated with the winter storm), chemical production rose 5.1% in April…with particularly large gains in bulk petrochemicals & organic intermediates as well as plastic resins [a key component of many construction plastics. Industry news service] ICIS is now reporting that less than 5% of chemical capacity remains offline due to the winter storms, a big improvement over recent weeks.”

There were 344,000 job openings in construction, seasonally adjusted, at the end of March, up 26% from February and up 51% y/y from March 2020, when covid-related shutdowns were peaking, BLS reported on Tuesday in its latest Job Openings and Labor Turnover Survey (JOLTS) release. Hires in March totaled 445,000, the most for any month since October 2019 and the most for march since 2007. The March total up 12% from February and up 10% y/y. There were 150,000 layoffs and discharges, down 38% from a month earlier and down 76% y/y. Quits totaled 184,000, the most since February 2019, up 9.5% for month and up 36% y/y. Together, these data suggest contractors have increased their hiring and would like to hire more workers, as workers gain confidence that they can quit and find another job. However, JOLTS data combines nonresidential construction with residential, and it is not possible to tell if the demand and openings are coming from both segments of the industry. 

The Dodge Momentum Index jumped 8.6% in April from the revised March reading, Dodge Data & Analytics reported on May 7. The index “is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year….April’s gain marks the fifth consecutive monthly increase, and similar to February and March, was due to a large increase in institutional buildings entering the planning stage, while commercial planning eased by less than 1%. Since hitting its nine-year low in January, institutional planning has rebounded substantially, climbing 77% over the last three months. Healthcare and laboratory projects continue to dominate the sector, pushing institutional planning 50% higher on a [y/y] basis. Conversely, the commercial component has slipped in recent months as fewer warehouse projects have entered planning, though the sector is 21% higher than in April 2020. Overall, the Momentum Index is 31% higher than last April, which was the first full month of COVID-19 shutdowns….April’s data highlights the nascent recovery underway in institutional building. However, given the average length of time between planning and project start, this rise will likely not impact construction starts until late 2021 or early 2022.”

“Total state tax revenues patterns were markedly different this past year compared to most years, with dramatic declines in the April-June 2020 quarter, followed by average increases over the rest of the year, Lucy Dadayan of the Urban Institute reported on Tuesday. “On net, state revenues increased by $9.5 billion or 1.0% between April 2020 and March 2021 compared to the same period a year earlier….The national picture masks large variations across states; revenues declined in 18 states and by 8% or more in six states (Alaska, Hawaii, Florida, Nevada, North Dakota, and Texas), while revenues increased in 31 states and by more than 8% in two states (Idaho and Utah) over the past year.” State tax revenues are an important source of state and local construction funding. In addition, federal relief legislation in the past year is adding hundreds of billions of dollars to state and local revenues. While most of the money is not reserved for construction, the funds will allow agencies to avoid cuts needed to balance their budgets.