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AGC's Data DIGest: February 17-19, 2021

Gulf widens between input costs and bid prices; January starts slide, Dodge, ConstructConnect report

The gap between input costs for construction and contractors’ bid prices widened further in January. 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—inched up 0.2% from December, while the PPI for inputs to new nonresidential construction jumped 2.5%, the Bureau of Labor Statistics (BLS) reported on Wednesday. AGC posted tables and a chart showing PPIs relevant to construction. Since hitting a low in April, the nonresidential building “bid price” PPI has edged up only 0.2%, while PPIs for new-construction inputs have soared 10.7% for nonresidential and 10.5% for residential. (There is no “bid price” index for residential or nonbuilding construction.) Several PPIs that declined early in the pandemic or last fall have soared in recent months. The PPI for lumber and plywood jumped 9.8% in January and 50% year-over-year (y/y) since January 2020. The PPI for copper and brass mill shapes climbed 3.1% for the month and 22% y/y. The index for diesel fuel rose 4.2% and 9.2%, respectively. There were also major variations within broad categories. The PPI for all steel mill products rose 5.2% for the month and 7.4% y/y. But the PPI for fabricated structural metal for bridges leaped 10.5% and 15%, respectively, while the PPI for sheet metal products was unchanged for the month and declined 0.4% y/y. BLS revised some earlier PPIs after its annual update of the relative weights of inputs. Email ken.simonson@agc.org to see the new relative weights.

Some prices have risen even more since BLS calculated January PPIs based on producers’ prices as of January 11. “Lumber prices have shot to fresh records…according to pricing service Random Lengths,” the Wall Street Journal reported on Wednesday. “It has never cost more to buy oriented strand board, known as OSB and used for walls; Southern yellow pine, which is favored for fences and decks; or ponderosa pine, which is popular in cabinetry and interior trim. Many engineered wood products used in new construction, such as I-joists, are in short supply, and mills are backlogged with orders well into March, the pricing service said….AvalonBay Communities Inc. said that it has $750 million worth of new apartments on the drawing board. Whether the suburban developer starts all of them depends on lumber costs.” Steep increases in near-term futures prices for crude oil, copper, and steel scrap signal likely further price hikes for petroleum-based and metal construction products. Readers are invited to email ken.simonson@agc.org with information about prices, delays, and project postponements or cancellations.

This week’s massive storms and exceptionally cold weather will add to project delays and costs in a number of ways. Many plants have lost partial or all production for varying lengths of time because of interruptions to power; water supplies; natural gas for heating, fuel or feedstock; and inability of workers and trucks to reach facilities. Transport from some ports, truck terminals, railyards, airports, and barge movements have been disrupted by icy conditions or loss of power or water. Construction sites have also been affected directly.

Contractors are encouraged to fill out AGC’s latest coronavirus survey, launched today. The results will be reported in mid-March and are intended to document how the pandemic has affected contractors in the year since disruptions began.

Two measures of construction starts (dollars) posted decreases in January on both a y/y basis and for the latest 12 months over the previous 12. “Total construction starts dropped 4% in January [at] a seasonally adjusted annual rate,” Dodge Data & Analytics reported on Wednesday. “Nonresidential building starts were flat in January, while nonbuilding starts dropped 10% and residential starts were 4% lower….For the 12 months ending January 2021 total construction starts were 11% below the 12 months ending January 2020. [Total] nonbuilding starts were 15% lower…, street and bridge starts were 5% higher, but environmental public works starts were 3% lower, miscellaneous nonbuilding starts dropped 28%, and utility/gas plant starts lost 40%....[N]onresidential building starts tumbled 25% relative to the 12 months ending January 2020. Commercial starts dropped 27%, institutional starts were 15% lower, while manufacturing starts collapsed 59%. [Total] residential starts were 5% higher…Single-family starts gained 12%, while multifamily starts slid 12%.”

Starts declined 15% y/y from January 2020 to January 2021, data firm ConstructConnect reported on Tuesday. Nonresidential building starts plunged 45% y/y Engineering (civil) starts increased 5.6%. Residential starts rose 4.7%. For the 12 months ending January 2021, total starts were 29% lower than in the 12 months ending in January 2020. Nonresidential building starts plunged 34% y/y (commercial, -40%; industrial [manufacturing], -65%; and institutional, -15%). Engineering (civil) starts slumped 20%. Residential starts dipped 0.3% (apartments, -29%; single-family, 14%).

Housing starts (units) slipped 6.0% at a seasonally adjusted annual rate from December to January and 2.3% y/y from January 2020, the Census Bureau reported on Thursday. Multifamily (five or more units) starts jumped 16% for the month but slumped 35% y/y. Single-family starts decreased 12% for the month but climbed 17% y/y. However, starts in winter months can be heavily affected by unseasonably mild or harsh weather in the current or comparison months. Residential permits increased 10% from December and 22% y/y, with single-family permits up 3.8% and 30%, respectively, and multifamily permits up 28% and 7.9%.