A Sustainable Workforce Starts With You

AGC Data DIGest: Sept. 27-Oct. 5, 2021

Construction spending remained flat between July and August 2021, but increased 8.9% year-over-year (y/y) from August 2020 to a seasonally adjusted annual rate of $1.58 trillion, the Census Bureau reported on Friday. Year-to-date spending increased 7.0% from the total for January-August 2020. Nonresidential activity slipped 0.4% for the month and fell 3.0% y/y – posting losses in 11 out of the 16 nonresidential categories. Public construction spending rose 0.5% for the month but slumped 4.0% y/y. The largest public segment, public education construction, rose 1.1% from the prior month, but fell 5.9% y/y. Highway and street construction increased 1.6% and 2.7%, respectively. Public transportation construction rose 0.8% from July but decreased 9.5% y/y. Private nonresidential construction spending slipped 1.0% for the month and 2.3% y/y. The largest private nonresidential segment (ranked by year-to-date spending)—power—fell 1.4% in August and 1.2% y/y (including electric power, -2.4% y/y, and oil and gas field structures and pipelines, 3.3% y/y), followed by commercial, down 0.8% for the month and up 7.8% y/y (including warehouse, 17% y/y, and retail, -3.2% y/y); manufacturing, down 1.7% for the month and up 2.1% y/y; and office, 0.2% and -4.2%, respectively. Lodging had the largest y/y decrease, -31%. Private residential construction spending gained 0.4% for the month and 24% y/y (single-family, 38% y/y; multifamily, 13%; and owner-occupied improvements, 11%).

Numerous materials costs continue to increase. Firestone Building Products sent a letter to customers on October 1 announcing price increases for roofing membranes effective of “up to 15%” October 15 and an additional 10% on January 1, 2022; 40% on membrane plates, battens, and augers; and 8% on asphalt. Steel plate prices climbed another $80 per ton on September 22. New South Construction Supply reported on Wednesday, “Wire mesh reinforcing…lead times are currently running 12-16 weeks. …the wire mesh mills pushed out a $40.00 per ton increase on September 15…Polyethylene saw another small increase…September 13.” The national average price of on-highway diesel fuel on Monday was $3.477 per gallon, an increase of $1.09 (46%) from one year earlier and the highest since December 2014, the Energy Information Administration reported on Monday. Contractors pay for diesel directly for their own trucks and equipment and indirectly through freight costs and fuel surcharges.

Futures prices for items used in construction also continue to rise. Lumber futures “are up almost 40% since late August, while pricing service Random Lengths said that its framing composite index, which tracks on-the-spot sales, has added 27%,” the Wall Street Journal reported on Saturday. “At $625.10 per thousand board feet, lumber futures are nearly as expensive as they ever were before the pandemic. Analysts say prices need to climb higher to balance supply with demand. That could be a shock to builders and other buyers expecting market-equilibrium lumber prices to be closer to the $357 that futures averaged between 2015 and 2019…. natural gas prices rose 61% in the third quarter [(Q3) of 2021.] Paintmaker Sherwin-Williams Co. told investors this week to expect lower sales and profits this year due to scarcity of some materials and more expensive inputs like solvents and steel. The Cleveland company said the situation has worsened since Hurricane Ida slammed into Louisiana last month and upset operations at chemical plants and gas platforms along the Gulf Coast.”


“The Q3 2021 U.S. Chamber of Commerce Commercial Construction Index (CCI) found that commercial construction contractors are seeing a slowdown in the post-pandemic recovery as escalating challenges—including worker shortages, materials shortages, and rising costs—mount,” the Chamber reported on September 22. “Almost all (92%) contractors report some level of difficulty finding skilled workers, but this quarter, 55% indicate high levels of difficulty—a jump of 10 percentage points from Q2. This lack of workers is having an impact on contractors’ bottom lines. The lack of skilled workers has caused 42% of those contractors reporting difficulty finding workers to turn down work, up from 35% in Q2. Also, this quarter, 73% of those contractors who report difficulty finding skilled labor say it’s a challenge to meet project deadline requirements (up from 56% in Q2), and 59% are putting in higher bids for projects (up from 50%)….Contractors are also struggling to find materials to complete their projects and are increasingly concerned about their fluctuating costs. A record 93% of contractors report they are facing at least one material shortage. Also, an all-time high of 98% of contractors say building product cost fluctuations are having an impact on their business, up 35 points year-over-year….Reversing a year-long trend, the product which most contractors are experiencing a shortage in this quarter is steel (34%), followed closely by lumber at 31%. Since Q3 [2020], lumber had been the most often reported shortage. Last quarter, 33% of contractors reported a lumber shortage, 29% reported a steel shortage. As steel shortages worsen, contractors are growing more worried about steel tariffs. 45% of contractors say steel and aluminum tariffs will have a high to very high degree of impact on their business in the next three years, up 10 points from 35% in Q1 2021….More contractors report pulling back their purchasing plans this quarter: 40% say they will increase spending on tools and equipment over the next six months (down from 44% who said they would increase spending in Q2). Contractors are less confident in their revenue expectations. The percentage of contractors who expect their revenue to increase (37%) is down two points from last quarter, while more contractors (10%) expect their revenue to decrease, up from 6% in Q2.”