Materials prices continued rising this week. Copper futures closed Thursday at $4.26 per pound, a nearly 10-year high and up 63% from a year ago. The national average retail price for on-highway diesel fuel on Monday climbed for the 16th week in a row, by 10 cents per gallon from a week ago to $2.97, a 25% rise since the low point on November 2, according to data the Energy Information Administration posted on Monday. Near-month futures prices for natural gas and West Texas Intermediate crude oil have each increased 26% in the past year, pushing up the cost of fuels, petrochemical feedstocks, and liquid asphalt. “Engineering and construction costs increased for the fourth consecutive month in February,” IHS Markit and the Procurement Executives Group reported on Wednesday, noting increases for carbon steel pipe, fabricated structural steel, and ocean freight from both Europe and Asia. “Survey participants witnessed price escalations for all categories under the materials and equipment sub-index for the second month in a row….The sub-index for current subcontractor labor costs came in…slightly higher” than in January. In the aftermath of last week’s freezing weather across much of Texas, thousands of properties suffered damage from broken water pipes. Repairs and replacements will add to demand for plumbing supplies, wallboard, and other materials. Readers are invited to email information about construction costs and supply-chain issues to email@example.com.
Contractors are encouraged to fill out AGC’s latest coronavirus survey before it closes on March 4. 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.
The share of construction firms reporting “production delays at this business” increased to 16.2% in the week of February 15-21 from 15.0% in the week of January 4-10, the Census Bureau reported on Thursday in releasing its latest Small Business Pulse Survey. The share reporting foreign supplier delivery delays increased to 10.1% from 8.9%. But the share reporting domestic supplier delays fell to 36.8% from 37.7% and the share reporting no delays or difficulties edged up to 54.5% from 54.0%. All of these percentages have changed little over the past six months. The share reporting business has returned to normal relative to one year ago rose to 12.6% from 11.1% six weeks earlier. But the share that expects returning to normal will take more than six months also rose, to 37.2% from 35.6%.
The Architecture Billings Index (ABI) moved up to a reading to 44.9 in January, seasonally adjusted, from 42.3 in December but remained mired several points below the breakeven level of 50, the American Institute of Architects reported on Wednesday. AIA says, “The ABI serves as a leading economic indicator that leads nonresidential construction activity by approximately 9-12 months.” The ABI is derived from the share of responding architecture firms that report a gain in billings over the previous month less the share reporting a decline in billings, presented on a 0-to-100 scale. Any score below 50 means that firms with decreased billings outnumbered firms with increased billings. All four ABI scores by practice specialty (based on three-month moving averages) were little changed from December and remained below 50 for the third-straight month: mixed practice, 47.9 (up from 47.5 in December); residential (mostly multifamily), 44.4 (down from 46.6); commercial/industrial, 44.3 (down from 44.6); and institutional, 39.9 (up from 39.7). An index of the value of new signed design contracts rose to 48.8 from 47.0 in December. AIA revised past readings to reflect its annual updating of seasonal adjustment weights. Cancellations remain rare: “93% of respondents reported that at least a few of their firm’s active projects from the first quarter (Q1) of 2020 have since been successfully completed with no major delays or issues. However, nearly 14% of responding firms indicated that more than a few of their active projects from [Q1] 2020 have been stalled or postponed and have not yet restarted, with 17% of firms with an institutional specialization reporting the same, versus just 7% of firms with a multifamily residential specialization.”
Consistent with the declining ABI reading for residential billings, “builder and developer confidence in multifamily markets fell” in Q4 2020, the National Association of Home Builders (NAHB) found in its latest quarterly Multifamily Market Survey, released on Thursday. The survey’s Multifamily Production Index (MPI) fell 5 points to 43. “The MPI measures builder and developer sentiment about current conditions in the apartment and condominium market on a scale of 0 to 100. The index and all of its components are scaled so that a number below 50 indicates that more respondents report conditions are getting worse than report conditions are improving. The MPI is a weighted average of three key elements of the multifamily housing market: construction of low-rent units (apartments supported by low-income tax credits or other government subsidy programs), market-rate rental units, and for-sale units (condominiums). All three components decreased in [Q4]: the component measuring low-rent units dropped four points to 42, the component measuring market rate rental units decreased five points to 48 and the component measuring for-sale units declined seven points to 39.” On Wednesday, NAHB reported, “According to NAHB analysis of quarterly Census data, the market share of rental units of total multifamily construction starts ticked higher to near 97% during [Q4] 2020. In contrast, the historical low share of 47% was set during [Q3] 2005, during the condo building boom….As demand shifted to suburban markets in 2020, condominium or for-sale multifamily starts declined by 28% for the year. During [Q4] 2020, there were only 3,000 condo multifamily units that started construction. There were 84,000 rental apartment starts.”
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