In synopsis form, here are ten of the top economic news items or data “nuggets” to emerge through the mid-point of 2014’s final month.
(1) The biggest surprise for the economy lately has been the 40% collapse in the international price of oil. This is expected to especially help the steelmaking, petrochemical and airline industries. The story for steelmakers is taking an interesting turn, though. The sector has been experiencing a resurgence due to the need for piping and tubular products in the booming energy field. Also, steel demand has surged for motor vehicles and railway tanker cars. Lower gasoline prices should amplify the trend towards more car and light truck sales, except keep an eye on the launch of Ford’s next generation aluminum-body F-150. It will feature a further weight reduction and greater rust-resistance. The steel industry responds that it has developed stronger-strength and lighter-weight alloys that place it on an equal footing to whatever the competition can offer.
(2) The total number of jobs in the U.S. economy in November rose by 321,000, the fourth largest monthly gain since the recession. The year-over-year increase in employment is now +2.0%. “Business and professional services”, +3.9%, and construction, +3.6%, are the two standouts among major sub-sectors. If you’ve been reading “Nuggets” for a while, you’ll know I like to track six high-profile sub-categories. Several of those have increased hiring at a faster pace than the national average: accounting and bookkeeping services, +4.6%; motor vehicle and parts manufacturing, +4.5%; architectural and engineering services, +4.0%; and computer system design services, +3.6%. After achieving +4.1% in January of this year, “amusements, gambling and recreation” has eased to +2.3%. Legal services has fallen into decline, -0.2%.
(3) Who can doubt that we are indeed living in the age of science fiction when you read the latest story about elevator mechanics? Current building design is constrained by a single cabin in a vertical shaft that can safely rise only so high, pulled upward by a cable. ThyssenKrupp of Germany has announced it will be pursuing magnetic levitation (maglev) technology to allow multiple cabins to move in continuous-loop patterns up-down, sideways and even diagonally in or on the outside of a structure. “Traffic control” will be needed so the boxes don’t run into each other. It will greatly expand the creative license architects and engineers will be able to employ.
(4) Based on data from the Census Bureau through October – in other words, with only one-sixth of the year still to go – CMD is estimating that the largest percentage gains in put-in-place construction in 2014 will occur in the following major type-of-structure sub-categories: power, +19.6%; lodging, +18.3%; offices, +18.2%; retail, +10.2%; and amusement and recreation, +5.1%. There has been notable weakness this year in health care, -7.1%; water supply, -6.8%; communication, -4.9%; and public safety, -3.8%. Educational (+0.2%), sewage and water disposal (+1.0%) and highway and street construction (+2.5%) have shown little change.
(5) Grand total put-in-place construction this year is expected to be 6.8% higher than in 2013, based on “current” (i.e., not adjusted for inflation) dollars. By comparison, 2013’s year-over-year increase was 5.7%, while 2012’s was a more robust 9.2%. The improving economic cycle will lift the percentage change to +9.8% in 2015 and +10.0% in 2016. 2014’s +6.8% figure is made up of residential at +6.7%, non-residential building at +6.0% and civil/engineering, +7.7%.
(6) The sales and profit outlooks for America’s manufacturing sector are perking up. Companies are realizing savings on heating and cooling costs, transportation costs and what they have to pay for some key energy inputs. Also, with the greenback soaring higher, imports are becoming cheaper. According to the Federal Reserve, the manufacturing sector in October – with a capacity utilization rate of 77.2% − remained well short of the 85% benchmark that usually signals a push to expand facilities. An improvement to that level, however, is approaching faster.
(7) Here’s something you don’t see every day. The Mayor of Quebec City has taken to wearing a T-shirt with wording that asks Microsoft founder, Bill Gates, to paint his bridge. As you can imagine, there’s background to consider. A heritage road, rail and pedestrian cantilever crossing of the St. Lawrence River has fallen victim to extensive rusting. Three levels of government have agreed to contribute half of the estimated $200 million cost to paint the structure with a protective coating. But the owner of the bridge, Canadian National (CN) Railway says its responsibility ends with ensuring safety. The company’s positon has been endorsed by the province’s Superior Court. So why the appeal to Mr. Gates? He’s CN’s majority shareholder.
(8) The Auditor General in the province of Ontario, Bonnie Lysyk, has rebuked Queen’s Park for supposedly wasting billions of dollars through the adoption of public-private partnerships (i.e., the P3 alternative financing model) to carry out many of its major construction projects. Ms. Lysyk’s main contention is that governments can borrow money at interest rates so much more favorable than those available to business concerns. This is sure to inspire a lively debate, with speed-to-completion and greater efficiencies realized by private sector management versus public sector oversight as the main counter arguments. Cash-strapped U.S. states are finally embracing the P3 process more whole-heartedly. We’ll see if their enthusiasm is dampened.
(9) The U.S. Conference Board’s consumer confidence index fell back to 88.7 in November, after reaching as high as 94.1 in October. The Purchasing Managers’ Index (PMI) of the Institute of Supply Management (ISM) also eased in the latest month, to 58.7% from its prior level of 59.0%. The January-to-November average of the PMI has been 55.8%. Based on the past relationship between the PMI and “real” (i.e., inflation-adjusted) gross domestic product (GDP) growth, the economy has been advancing at a 4.2% rate this year. The Bureau of Economic Analysis (BEA) isn’t quite as bullish. It recently revised upwards the nation’s Q3 GDP annualized growth rate to 3.9% from a preliminary estimate of 3.5%. The third quarter’s year-over-year progress was +2.4%. Canada’s Q3 GDP annualized growth rate was +2.8%.
(10) Earlier this month, Lockheed Martin’s Orion deep-space rocket ship managed a gloriously successful test flight and re-entry. Meanwhile, back on earth, and despite a number of embarrassing public-relations gaffes, the taxi-equivalent and App-accessible firm, Uber Technologies Inc., scored an over-the-moon valuation of $41 billion. If Karl Marx were alive today, do you suppose he’d be delighted or disturbed by the take-off of the sharing economy?
A monthly analysis of construction start activity across Canada and by region, the construction starts product provides accurate and complete information, ahead of government statistics, on square footage totals, number of units, dollar value and percentage change over the year.