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Catalyst Construction Brief
July 2017


Latest Economic Data

U.S. Census Bureau
Construction Spending
MAY 2017 vs. MAY 2016
Seasonally Adjusted Annual Rate

All Construction Spending:   +4.5%
Public Construction:   -0.6% 
Private Construction:  +6.2%

Quick Analysis: The private market continues to show strength. An interesting note on the private side is that multi-family spending growth appears to be leveling off. The delta in public spending versus the prior year has narrowed which is a positive sign for that segment of the market.

May Sector Highlights:

Year-Over-Year Spending Growth
Office: +14.7%
Commercial: +9.1%
Private Single-Family:  +7.9%
Educational: +6.8%
Private Multi-Family: +3.0%
Lodging: +2.3%
Health Care: +2.1%
Highway & Street: +1.2 %

Year-Over-Year Spending Declines
Transportation: -2.8%
Power: -7.9%
Water Supply: -8.5%
Manufacturing: -10.5%
Sewage & Waste Disposal: -16.0%


ENR Construction Cost Index
JUL 2017 vs. JUL 2016

Total Construction Costs:  +4.0%
Building Cost Index:  +3.3%  
Material Cost Index:  +0.3%
Skilled Labor Costs:  +1.8%
Common Labor Costs:  +3.4% 

Quick Analysis:  Inflation in labor costs continue to be the primary driver of  the increasing Total Construction Cost Index. This trend accelerated in July with common labor costs increasing even further, thus driving the Total Construction Cost Index to mark a 4% increase over the prior year's costs.

U.S. Bureau of Labor Statistics
JUN 2017

Construction Unemployment:  4.5%

Quick Analysis: Industry unemployment for the month of June of 4.5% represents the lowest level of industry unemployment dating back to before 2000. This level of unemployment represents what economists consider "full employment", meaning further inflation in labor costs are likely coming.

AIA Architectural Billings Index (ABI)
JUN 2017

Architectural Billings Index (ABI):  54.2
Commercial/Industrial ABI:  52.1
Institutional ABI:  52.6
Residential: 57.1
New Project Inquiry Index (NPII):  58.6
Quick Analysis:  Index value > 50 represents  that architects have reported more activity for that particular metric than the prior month. These metrics are leading indicators as the ABI reflects projects in design that will enter the construction phase in 9 to 12 months and the NPII reflects new project demand from owners to potentially enter the design phase. 

Given the strength in design activity reported from the AIA in June, and for all of 2017 for that matter, we can expect to see ample new project opportunities over the next 18 months.

ABC Backlog Indicator
1st Quarter 2017

National Avg. Backlog: 9.0  months

On our website's  Construction Economics Hub you can find great detail on average reported backlogs by:
  • Company Size
  • Contractor Type
  • Geography

Quick Analysis: T he ABC's Backlog Indicator report for the first quarter of 2017 shows that backlogs increased roughly 8% versus the fourth quarter of 2016.  The largest backlog growth was reported in the West Region and for companies in the $30-$50 Million annual revenue category. Greater detail can be found on our Economics Hub.

Economic Data Sources
Management Topics
Building The Workforce:
Apprenticeship Programs

With 20% of the current construction workforce slated to retire in the next five years, the current labor shortage is only going to intensify in the coming years.  Additional funding for apprenticeship programs from Washington is a step in the right direction. Construction Dive recently published an article that outlines a few apprenticeship programs across the country that have been effective in building the workforce.

Read Construction Dive Article

Project Management:
Managing Construction Schedule Float
 

ENR recently published an article which lays out a proactive strategy to avoiding project float. Early coordination between the owner and the contractor creates an environment where both parties most effectively work toward everyone's common goal: Getting the job done.

 

Immigration Policy: Impact on Contractors


The current administration has been vocal on its approach to immigration since the early days of the campaign.  With the current shortage of labor throughout the construction industry, the impact of this approach becoming law would have repercussions for many firms.
 


Global Infrastructure Needs: $94 Trillion
highway-panorama.jpg

The U.S. is certainly not alone throughout the world in needing a significant investment in infrastructure over the ensuing decades. The Global Infrastructure Hub recently reported that $94 trillion needs to be spent on infrastructure around the globe by 2040.
 
 
Read Reuters Article
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