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Catalyst Construction Brief
January 2017


Latest Economic Data

U.S. Census Bureau
YTD Total Spending
Nov. 2016 vs. Nov. 2015
Seasonally Adjusted Annual Rate

All Construction Spending:   +4.1%
Public Construction:   +2.6% 
Private Construction:  +4.6%

Quick Analysis: On a seasonally adjusted annual basis, overall 2016 construction put in place was trending just over 4% higher through November as compared to the prior year. A notable change in the November report is that public spending was actually up 2.6% versus the prior year. Public spending had been lagging the prior year in each month reported since April.

October Sector Highlights (vs. prior year):
Lodging:  +28.4%
Office:   +27.5%
Commercial:  +12.4%
Private Multi-Family:  +10.7%
Highway & Street:   
+10.5%
  
Educational:   +9.1%
Private Single-Family: 
-0.9%
Water Supply: -4.1%
Sewage & Waste Disposal: -7.7%
Manufacturing:  -8.1%

ENR Construction Cost Index
Jan. 2017 vs. Jan. 2016

Total Construction Costs:  +3.9%
Building Cost Index:  +2.9%  
Material Cost Index:  +0.6%
Skilled Labor Costs:  +3.2%
Common Labor Costs:  +3.7% 

Quick Analysis:  Overall construction costs increases have largely remained steady over the last few months. The Material Cost Index rose by 0.7% between Dec. and Jan which is a sizable monthly uptick. It appears this jump in the Material Cost Index is largely driven by reported lumber costs (+10.3% vs. the prior year).

U.S. Bureau of Labor Statistics
December 2016

Construction Unemployment:  7.4%

Quick Analysis: The construction industry unemployment rate jumped from 5.7% in November to 7.4% in December. This is normal for the winter months as firms in colder regions temporarily adjust their workforce. December's unemployment rate of 7.4% is the industry's lowest reported unemployment for the month since 2006 (6.9%).

AIA Architectural Billings Index (ABI)
December 2016

Architectural Billings Index (ABI):  55.9
New Project Inquiry Index (NPII):  57.2

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. 

The level of design activity reported in December indicates a strong pipeline of additional projects slated to enter the construction phase in the first half of 2017.

ABC Backlog Indicator
3rd Quarter 2016

National Avg. Backlog: 8.7  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: After two consecutive quarters of a slight contraction in the national average backlog, the ABC reported an increase in average backlog to 8.7 months of work in the third quarter. 

The South Region's average reported backlog of 10.7 months is far beyond the backlogs reported in the other three regions (Northeast: 7.6, Middle States: 8.3, West: 6.7). Large companies (>$100 Million of revenue) continue to carry the highest average backlog with an average of 13.7 months of work on hand.

Economic Data Sources
Management Topics
AIA's Consensus Construction Forecast

Each year we look forward to the AIA's release of their Consensus Construction Forecast.  This tool provides an extremely easy way to see what seven of the leading construction economists call for in terms of growth across the major sectors of the construction industry.

See AIA's Consensus Forecast Tool

Note: This is an interactive tool as you can click on each of the different sources to see their respective forecast.
FMI Chair's State of the Industry


The Chairman of FMI published an insightful article outlining their perspective on the current state of the construction industry.  In summary, they believe we will see annual construction spending growth of 5% in 2017 and that we have several good years ahead of us before the industry can expect tough market conditions.
 
Surety Market Update
1st Quarter 2017


The surety market remains "soft" in early 2017.  This is good news for contractors that pursue bonded work.  Find out what is driving the current surety market and the industry's outlook.
 


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