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Catalyst Construction Brief
June 2017


Latest Economic Data

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

All Construction Spending:   +6.7%
Public Construction:   -4.4% 
Private Construction:  +10.4%

Quick Analysis: The private market continues to show strength as private construction spending through April of 2017 is up roughly 10% versus the same time period in 2016. Consistent with recent trends, public spending remains down.

April Sector Highlights:

Year-Over-Year Spending Growth
Office: +12.4%
Commercial: +12.4%
Private Multi-Family: +10.1%
Private Single-Family:  +7.7%
Lodging: +5.9%
Educational: +2.4%
Highway & Street: +0.1 %
Health Care: +0.0%

Year-Over-Year Spending Declines
Transportation: -0.8%
Power: -2.6%
Water Supply: -8.1%
Manufacturing: -8.5%
Sewage & Waste Disposal: -23.6%


ENR Construction Cost Index
JUN 2017 vs. JUN 2016

Total Construction Costs:  +3.5%
Building Cost Index:  +3.4%  
Material Cost Index:  +0.5%
Skilled Labor Costs:  +1.6%
Common Labor Costs:  +2.5% 

Quick Analysis:  Inflation in labor costs continue to be the primary driver of  the increasing Total Construction Cost Index. This trend is not expected to change in the ensuing months. The second round of tariffs recently announced on Canadian softwood lumber will continue to put upward pressure on the material index.

U.S. Bureau of Labor Statistics
MAY 2017

Construction Unemployment:  5.3%

Quick Analysis: Industry unemployment for the month of May was reported at 5.3%.  This represents essentially the same level of industry unemployment as the prior year (May 2016: 5.2% unemployment). These levels of unemployment are the lowest on record for the month of May since 2001.

AIA Architectural Billings Index (ABI)
MAY 2017

Architectural Billings Index (ABI):  53.0
Commercial/Industrial ABI:  51.2
Institutional ABI:  51.2
Mixed Practice (Use): 55.8
Multi-Family Residential: 51.3
New Project Inquiry Index (NPII):  62.4

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 May, and for all of 2017 for that matter, we can expect to see ample new project opportunities in the future. This data shows us that there is certainly demand from project owners. The primary items that could derail this demand being recognized in the market would be a change in availability of financing or a shift in broad economic confidence. 

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
Tax Reform Timeline Slips

The initial goal for a tax reform bill to hit the chambers of Congress was August 2017. With the administration's health reform effort seemingly stalled in the Senate, the tax reform initiative has taken a seat on the back burner.  The new goal is to introduce tax reform legislation by the end of the year.

Read U.S. News & World Report Article

Managing Your Business:
Avoiding The Executive Bubble
 

If you aim to maximize productivity within your company, it's vital that the leader is in tune with how each level of the organization is operating. Without a healthy level of trust and communication from each of these levels, it's tough for the leader to get a true pulse for how the company is running. FMI lays out four ways which a construction executive can avoid finding themselves trapped in the feared executive bubble. 

 

More U.S. Tariffs On Canadian Lumber


In late June, the U.S. Commerce Department announced another series of tariffs on Canadian softwood lumber. Combined with the tariffs announced earlier in the year, the combined duties levied against Canadian lumber would range from 17.4% to 30.8%.  Given over $5 billion of Canadian lumber is used annually in the U.S., these tariffs will materially impact commercial and residential building costs.
 




Wishing you an Independence Day filled with pride for our country, gratitude for those that scarified to earn the freedoms we enjoy today, and hope for continued prosperity tomorrow.

Happy 4th!

- The Catalyst Team
5200 77 Center Dr., Ste 110
Charlotte, NC 28217

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