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AGC's Data DIGest: April 8-17, 2019

PPIs diverge in March; February job openings hit peak; ConstructConnect says starts dive

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The producer price index (PPI) for final demand in March, not seasonally adjusted, increased 0.7% from February and 2.2% year-over-year (y/y) from March 2018, the Bureau of Labor Statistics (BLS) reported on Thursday. AGC posted tables and an explanation focusing on construction prices and costs. Final demand includes goods, services and five types of buildings that BLS says make up 31% of total nonresidential 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—rose 0.2% for the month and 5.1% y/y. Increases ranged from 3.5% y/y for warehouses to 4.9% for offices, 5.3% for health care buildings, 5.4% for schools and 5.9% for industrial buildings. Increases in PPIs for subcontractors' new, repair and maintenance work on nonresidential buildings ranged from 2.3% y/y for roofing contractors to 4.2% for electrical contractors, 4.5% for plumbing contractors and 6.9% for concrete contractors—the largest y/y jump for concrete contractors in the 12-year history of the index. The PPI for inputs to construction—excluding capital investment, labor and imports—increased 1.0% for the month and 2.6% y/y. This index covers both goods (56%) and services (44%). The PPI for energy inputs to construction soared 12% for the month, reversing recent declines, and was up 1.1% y/y. The PPIs for nonenergy goods inputs and services each rose 0.2% for the month and 2.8% y/y. Price changes for specific inputs important to construction diverged widely. Inputs with large one- or 12-month price changes include steel mill products, 0.1% and 10%, respectively; architectural coatings, 0 and 9.7%; diesel fuel, 13% and 9.2%; asphalt felts and coatings, -2.8% and 8.2%; construction machinery and equipment, 0 and 5.6%; paving mixtures and blocks, -0.8% and 5.1%; gypsum products, -1.2% and -8.6%; copper and brass mill shapes, 2.2% and -4.6%; and lumber and plywood, 0.1% and -10%.

There were 286,000 job openings in construction at the end of February, not seasonally adjusted, a jump of 88,000 (44%) from February 2018, and the highest February total in the series' 19-year history, BLS reported on April 9 in its latest Job Openings and Labor Turnover Survey (JOLTS) release. The industry hired 300,000 employees in February, not seasonally adjusted, down from an unusually high 394,000 in January and down from 331,000 in February 2018. The decline this February may have resulted from widespread severe weather and from the fact that more workers than usual were hired in January. The record level of openings suggests contractors remain eager to add employees. The rate of layoffs and discharges, 2.1% of employees, remained close to the rates in February 2018 (2.0%) and February 2017 (1.9%) and far below earlier years—another sign that contractors expect to remain busy.

Construction data firm ConstructConnect reported on April 12 that the value of starts in March 2019 declined 14% from March 2018. Nonresidential building starts increased 11% (commercial construction, 14%; institutional, -12%; and industrial, 185%). Residential starts decreased 9% (single-family, -3%, and apartments, -26%) and heavy engineering (civil) shrank 44%. The value of starts in the latest 12 months combined slipped 3.5% from the March 2018-March 2019 period, with nonresidential starts down 0.8% and residential starts down 7.9%.

Highway and street construction spending increased 18% in the first two months of 2019 compared to the same period in 2018, the Census Bureau reported on April 1—the largest percentage gain out of 18 structure types. Today, investment research firm Thompson Research Group reported, "Lettings, contracts actually awarded to contractors [and] possibly the best measure for future construction levels," increased in July-December 2018 from the same period in 2017: in North Carolina by 196%; Arizona and California, 68% each; Tennessee, 35%; South Carolina, 32%; and Colorado, 21.5%. Georgia and Texas were flat while Florida and Virginia were off 57% and 45%, respectively. The firm added, "We believe the momentum is only in the beginning phase (several states have multi-year tax increases yet to be implemented) and will lead to a busy construction season in 2019." Lettings count the full value of a contract in the month it is awarded; Census data report spending as it occurs.

The Architecture Billings Index (ABI) fell below the breakeven 50 mark in March for the first time since January 2017, with a seasonally adjusted score of 47.8, down from 50.3 in February, the American Institute of Architects reported today. The ABI measures the percentage of surveyed architecture firms that reported higher billings than a month earlier, less the percentage reporting lower billings; scores below 50, on a 0-100 scale, suggest billings decreased overall. Scores (based on three-month moving averages) for three practice specialties each declined for the third straight month and dropped below 50 for the first time since the second half of 2016: institutional, 48.9, down from 50.3 in February; residential (mainly multifamily), 47.7, down from 50.1; and commercial/industrial, 47.0, down from 50.6. "Though billings haven't contracted in a while, it is important to note that it does follow on the heels of a particularly tough late winter period for much of the country," said AIA Chief Economist Kermit Baker. "Many indicators of future work at firms still remain positive, although the pace of growth of design contracts has slowed in recent months."

Data DIGest is a weekly summary of economic news. All rights reserved. Sign up at http://store.agc.org. Editor: Ken Simonson, Chief Economist, AGC, simonsonk@agc.org