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Catalyst Construction Brief
August 2017


Latest Economic Data

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

All Construction Spending:   +1.6%
Public Construction:   -9.5% 
Private Construction:  +5.3%

Quick Analysis: Year-over-year growth in the overall U.S. construction market leveled off to a degree in June on a seasonally adjusted basis. All growth continues to be driven by the private market as public construction spending continues to decrease versus the prior year.

June Sector Highlights:

Year-Over-Year Spending Growth
Commercial: +13.0%
Office: +11.0%
Private Single-Family:  +9.0%
Health Care: +2.8%
Private Multi-Family: +0.6%

Year-Over-Year Spending Declines
Lodging: -0.2%
Educational: -6.1%
Manufacturing: -7.3%
Highway & Street: -8.1%
Transportation: -8.7%
Power: -9.9%
Water Supply: -16.4 %
Sewage & Waste Disposal: -16.8%


ENR Construction Cost Index
AUG 2017 vs. AUG 2016

Total Construction Costs:  +4.4%
Building Cost Index:  +3.4%  
Material Cost Index:  +0.1%
Skilled Labor Costs:  +2.1%
Common Labor Costs:  +4.0% 

Quick Analysis:  Inflation in labor costs continue to be the primary driver of  the increasing Total Construction Cost Index. With a tight employment market, this trend is not expected to change in the ensuing months.

U.S. Bureau of Labor Statistics
JUL 2017

Construction Unemployment:  4.9%

Quick Analysis: Industry unemployment for the month of July registered at 4.9%. While this figure represents low unemployment throughout the industry, it is interesting to note that the unemployment rate increased to 4.9% in July from 4.5% in June. Typically the unemployment rate drops from June to July each year.  The last time the unemployment rate did not decrease in July versus June was 2009.

AIA Architectural Billings Index (ABI)
JUL 2017

Architectural Billings Index (ABI):  51.9
Commercial/Industrial ABI:  55.4
Institutional ABI:  52.0
Residential: 55.8
New Project Inquiry Index (NPII):  59.5

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 through all of 2017 to date, there is a healthy level of demand for new projects from project owners.

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
AGC Survey Results: Labor Trends
engineers_at_construction.jpg

Over 1,600 contractors from across the country responded to a survey put out by the Associated General Contractors of America.  Not surprisingly, the results found that the majority of contractors are struggling to find labor.  Beyond confirming the widespread difficulty of finding labor across the country, the survey results also provided insight on what steps companies are taking to retain and attract employees.

See AGC Report

U.S. Delays Canadian Lumber  Tariffs
hardware-lumber-stack.jpg  

This week the U.S. Commerce Secretary announced a two and a half month delay on enacting tariffs on Canadian lumber to try and negotiate a settlement. The tariffs range anywhere from 17% to 31%, thus would have a notable impact on overall construction costs.

 

Developing Your Company's Leaders


The development of your company's next generation of leaders is a task that is vital to your firm's enduring success. Management consulting firm McKinsey & Company recently published an insightful report outlining the key factors that determine just how effective your leadership development strategy will be.
 


Tax Reform:
White House Begins Public Push


The first of a series of speeches to sell tax reform to the American public begins today in Missouri. Precise details of what the tax reform plan entails will not be released at this point, but today's speech is the official kickoff in building public support for reform.
 
 
Read Bloomberg Article
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