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The producer price index (PPI) for final demand in August, not seasonally adjusted, decreased 0.3% from July but increased 2.8% year-over-year (y/y) from August 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 3.4% y/y. Increases ranged from 2.6% y/y for warehouses to 3.1% for schools, 3.5% for health care buildings, 3.6% for industrial buildings and 3.9% for offices. Increases in PPIs for subcontractors' new, repair and maintenance work on nonresidential buildings ranged from 0.8% y/y for roofing contractors to 2.9% for plumbing contractors and 4.1% for both electrical and 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 declined by 0.8% for the month but rose 6.2% y/y, topping the 3.4% PPI increase for inputs to new nonresidential building construction and implying a growing cost squeeze for contractors. Increases for inputs to seven nonresidential structure types ranged from 4.6% for industrial structures to 7.9% for highways and streets. PPIs for inputs to new residential structures rose 5.9% y/y for single-family and 6.1% for multifamily. The PPI for services inputs to construction rose 3.9%, while the index for goods inputs (including items consumed by contractors, such as diesel fuel) climbed 8.1% (26% for energy and 5.5% for goods less food and energy). Inputs important to construction that had large one- or 12-month price changes include diesel fuel, down 1.9% in August but up 34% y/y; steel mill products, 2.6% and 19%, respectively; aluminum mill shapes, -2.1% and 14%; asphalt paving mixtures and blocks, 1.8% and 9.2%; gypsum products, 2.8% and 8.2%; truck transportation of freight, -0.2% and 7.2%; lumber and plywood, -6.2% and 6.6%; and asphalt felts and coatings, -0.1% and 6.5%. Readers are invited to send examples of price changes or project delays and cancellations due to rising prices and actual or anticipated trade measures to simonsonk@agc.org.
Nonfarm payroll employment in August increased by 201,000, seasonally adjusted, from July and by 2,330,000 (1.6%) y/y, the BLS reported on Friday. The unemployment rate held steady at 3.9%.Construction employment rose by 23,000 for the month and 297,000 (4.3%) y/y to 7,259,000 (the most since May 2008 but 6.0% below the April 2006 peak). Average hourly earnings in construction rose 3.3% y/y to $29.95, or 10% more than the private-sector average ($27.16, up 2.9% y/y). Theunemployment rate in construction, not seasonally adjusted, fell from 4.7% in August 2017 to 3.4%, matching July's rate as the lowest since the series began in 2000.
There were 273,000 job openings in construction at the end of July, up from 255,000 in July 2017 and the highest July total in the series' 18-year history, BLS reported on Tuesday in its latest Job Openings and Labor Turnover Survey (JOLTS) release. The jump occurred even though the industry hired 446,000 employees in July, not seasonally adjusted, the highest July total since 2014. These figures, along with the positive August employment report and the recent AGC workforce survey, suggest contractors are still eager to hire more workers but are having difficulty finding ones who have construction experience.
Construction spending totaled $1.315 trillion at a seasonally adjusted annual rate in July, up 0.1% from the upwardly revised June rate and up 5.8% from July 2017, the Census Bureau reported on September 4. Public construction climbed 0.7% for the month and 8.3% y/y. Of the three largest public segments, highway and street construction rose 0.4% for the month and 3.9% y/y; educational construction, 2.1% and 1.9%, respectively; and transportation, -1.3% and 20% (45% y/y for state and local airport construction and 5.2% for other public transportation—port, transit and passenger rail).Private nonresidential construction spending slid 1.0% for the month but increased 3.2% y/y. Of the four largest components, power (electric power plus oil and gas pipelines and field structures), fell 0.7% for the month but rose 7.8% y/y; commercial, -3.4% and 0.5%, respectively (with retail, -8% y/y, and warehouse, 13% y/y); office, 0.3% and 6.8%; and manufacturing, 0.6% and -4.4%. Private residential spending rose 0.6% in July and 6.7% y/y. New multifamily construction decreased 0.4% for the month but increased 1.1% y/y; new single-family construction, -0.3% and 6.0%, respectively; and residential improvements, 2.1% and 9.4%.
"Reports from the Federal Reserve districts suggested that the economy expanded at a moderate pace through the end of August," the Federal Reserve reported on Wednesday in its latest "Beige Book." The report is a compilation of informal soundings of business conditions in each Fed district. The summary has these comments relevant to construction: "Home construction activity was mixed but up modestly, on balance....Commercial real estate construction was also mixed ....construction workers, truck drivers, engineers, and other high-skill workers remained in short supply...Six of the 12 districts cited instances in which labor shortages were constraining sales or delaying projects...a number of districts cited steep wage hikes for construction workers. Some districts indicated that businesses were increasingly using benefits—such as vacation time, flexible schedules, and bonuses—to attract and retain workers, as well as putting more resources into training....All districts noted fairly widespread input price pressures, particularly for construction materials and freight transportation....Businesses' input costs have generally been rising more rapidly than selling prices."
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.
