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Catalyst Construction Brief
April 2017


Latest Economic Data

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

All Construction Spending:   +3.0%
Public Construction:   -8.0% 
Private Construction:  +6.9%

Quick Analysis: Construction spending for the entire industry was up 3.0% in February 2017 versus the prior year. Consistent with the trend we have grown accustomed to in the recent past, private spending growth continues to show strength while public sector spending is down materially versus the prior year.

February Sector Highlights:

Year-Over-Year Spending Growth
Office: +20.6%
Lodging: +13.9%
Commercial: +12.2%
Private Multi-Family: +10.6%
Educational: +3.6%
Private Single-Family:  +3.4%    

Year-Over-Year Spending Declines
Highway & Street: -5.5 %
Manufacturing: -9.9%
Transportation: -10.6%
Water Supply:  -15.4%
Sewage & Waste Disposal: -27.7%


ENR Construction Cost Index
APR 2017 vs. APR 2016

Total Construction Costs:  +3.7%
Building Cost Index:  +3.2%  
Material Cost Index:  +0.7%
Skilled Labor Costs:  +1.8%
Common Labor Costs:  +3.3% 

Quick Analysis:  Inflation in construction costs continues to be driven by increases in labor costs. The Material Cost Index is likely to increase in the coming months given the newly imposed U.S. tariffs on Canadian soft lumber.

U.S. Bureau of Labor Statistics
MAR 2017

Construction Unemployment:  8.4%

Quick Analysis: The seasonality of industry unemployment in colder climates continues to transpire as it does each year. With that said, industry unemployment of 8.4% for March 2017 is the lowest unemployment rate on record for the month of March dating back to 2000 (March 2001 also registered at 8.4%).

AIA Architectural Billings Index (ABI)
MAR 2017

Architectural Billings Index (ABI):  54.3
Commercial/Industrial ABI:  49.8
Institutional ABI:  52.9
Residential ABI:  54.6
New Project Inquiry Index (NPII):  59.8

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. 

We saw a strong uptick in the ABI for March 2017.  This data combined with the recent trend in the ABI can lead to projections that there will continue to be a strong level of new projects entering the construction phase throughout 2017 and into early 2018.  Further, the fact that the NPII continues to register at well above the flat line of 50 each month indicates that construction activity should remain strong through 2018 (so long as project funding/financing remains available). 

ABC Backlog Indicator
4th Quarter 2016

National Avg. Backlog: 8.3  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 reported a slight contraction of average backlog carried by contractors across the country in the 4th quarter. The heavy industrial sector saw the largest drop with backlogs decreasing 16.8% on average on a quarter-over-quarter basis.

The South Region's average reported backlog of 9.6 months is far beyond the backlogs reported in the other three regions (Northeast: 8.4; Middle States: 7.6, West: 6.2). Large companies (>$100 Million of revenue) continue to carry the highest average backlog with an average of 10.8 months of work on hand.

Economic Data Sources
Management Topics
White House's Tax Reform Proposal: 
Impact on Pass-Through Corporations

While the White House's plan to reform the tax code is far from even hitting the floor for debate in Congress, business owners need to understand the potential impact it will have. A key element to the recently introduced plan rests in how pass-through corporations (S-Corps) will be taxed.


Read Money Magazine Article

Impact of U.S. Tariff on Canadian Lumber
 

The U.S. recently announced plans of enacting a tariff as high as 24% on Canadian softwood lumber.  With Canadian lumber comprising over 30% of lumber used in the U.S., domestic lumber prices will increase in turn.  

 

Building Your People


Choosing and developing the next generation of leaders in your organization can be a daunting task.  Included within FMI's latest quarterly publication is a report that provides keys to implementing an effective leadership development program within a construction company.
 


Construction Jobs


The Associated General Contractors recently released their analysis of the U.S. Labor Department's March 2017 employment data.  In March 2017, 39 states had reported an increase in the number of construction jobs between March 2016 and March 2017.  Just 17 states reported an increase in construction jobs between February and March.

 

Are You Seeing The Whole Picture?


 

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