CMD Group is a ConstructConnect™ company. Learn more

Construction Economic Notes – April, 2013

04/05/2013 by Bernard M. Markstein

Share

Economic overview
The automatic across-the-board cuts for most federal spending, otherwise known as sequestration, went into effect on March 1. A burden for the economy, sequestration’s effects are slowly accumulating and will continue to grow. Some furloughs begin this month (none occurred in March), and several agencies are looking for ways to make necessary cuts while avoiding or limiting furloughs. Some spending reductions were made in the months leading up to March, as many federal agencies and departments, as well as private suppliers, planned for sequestration. Most reliable estimates expect the total effect of sequestration will lower real (inflation-adjusted) gross domestic product (GDP) growth by 0.5%.

The adjustments for sequestration mean some government construction projects will be slowed, delayed or not started—ultimately adding to the cost of projects that do go forward. Meanwhile, the construction industry is likely to be among the first to feel the negative effects of sequestration, with smaller suppliers feeling the most pain. Some suppliers already are seeing a downturn in orders.

The third estimate of fourth quarter 2012 real GDP growth reported an increase of 0.4% at a seasonally adjusted annual rate (SAAR), up from the previous estimate of 0.1%. Although this increase is an improvement over earlier estimates based on less complete data, fourth quarter growth still registered the smallest quarterly increase since first quarter 2011. The slower growth was partially due to plans for sequestration as defense spending was cut. Most notable in the updated GDP data was the revision in investment in nonresidential structures, from an increase of 5.8% (SAAR) to an increase of 16.7%.

Recent problems with Cypress are a reminder that the Eurozone still faces a number of economic issues that have yet to be resolved. Further, these problems can adversely affect financial markets and economies outside the Eurozone.

Politics and the economy
Congress passed, and the president signed into law, a continuing resolution (CR) that keeps the federal government operating through the end of September. However, the CR leaves the sequestration (cutting total spending by $85 billion) in place with only minor modifications. Thus, one problem (funding federal government operations) was solved (sort of), but an unnecessary impediment to the economy (sequestration) was left in place. In terms of budgeting, the CR delays the need for longer-term planning and funding. Thus, if nothing is done before the end of September, the same threats to federal operations and the economy will arise once again.

Prior to September, the federal debt ceiling—another politician-created impediment for the economy—will need to be raised. The current, temporary ceiling expires in mid-May. If the ceiling reverts to its lower level, most federal government operations will grind to a halt. The lower ceiling will also force the U.S. Treasury to delay numerous payments, including payments for Social Security and Medicare, federal payrolls, contractors, tax refunds, and debt payments (a technical default of U.S. government debt).

Employment
Nonfarm payroll employment increased by a strong, seasonally adjusted (SA) 236,000 jobs in February, up from a 119,000 increase in January. For the past three months, employment gains have averaged 191,000 jobs per month, a reasonable, though unspectacular amount. That at least is a little higher than the 180,000 jobs per month average in the second half of 2012.

Construction employment increased 48,000 to 5,784,000 jobs—marking the ninth consecutive monthly increase and the highest level of construction employment since September 2009. The not seasonally adjusted (NSA) construction unemployment rate for February was 15.7%, down from 17.1% in February 2012. Reports of spot labor shortages in construction are increasing.

Construction spending
February total commercial construction spending was $885.1 billion (SAAR), +1.2% from January and +6.6% year-to-date (January and February) not seasonally adjusted (NSA), compared to the same period in 2012.

The total construction spending numbers incorporate the following:

  • Nonresidential building construction spending:  $297.8 billion, +0.6% from January; +0.6% year-to-date from 2012. Among the spending categories that increase in January were retail (+0.6%), health care (+1.9%), and manufacturing (+0.6%)
  • Heavy engineering construction spending:  $277.8 billion, +0.9% from January; +2.1% year-to-date from 2012
  • New residential construction spending:  $190.6 billion, +3.0% from January; +33.8% year-to-date from 2012
  • Private construction spending increased $7.8 billion (+1.3%) from January; +11.5% year-to-date from 2012
  • Public spending rose $2.5 billion (+0.9%) from January, but was down 3.8% year-to-date from 2012

Other construction-related economic developments
The February AIA Billings Index rose to 54.9 from 54.2 in January – its highest reading since November 2007. The index has now been above 50 for seven consecutive months. A reading above 50 indicates increased billings—a positive sign for commercial construction.

The February Producer Price Index (PPI) for building materials prices (does not include labor costs) was up 0.3% (SA) after increasing 0.5% in January and was up 2.4% (NSA) from February 2012

An index of prices for inputs to nonresidential construction shot up 1.3% (NSA) in February after rising 0.6% in January. On a year-over-year basis, the index was up 1.7%

Risks to the economy and construction
Major risks to the U.S. economy and, consequently, for commercial construction are:

  • Expiration of the temporary federal debt ceiling in May with no resolution
  • Failure to provide funding for the federal government beyond the current fiscal year by the end of September
  • One or more major European countries default on sovereign debt
  • One or more countries abandon the euro
  • Oil prices increase significantly (roughly 50% a barrel or higher) for a sustained period (two months or longer)

Recent Comments




Article Archive

Date Article
11/17/14 Top 10 largest construction project starts in the U.S. - October 2014
11/14/14 Non-residential Construction Starts Rose Gently in October
07/10/14 The Importance of Matching Volume to Contractor Capacity in JOC Procurement Strategy
07/10/14 Consider a Seed Project as Part of Your JOC Procurement Strategy
07/10/14 The Best Unit Price Book for Your Job Order Contract
07/02/14 ECONOMIC NUGGETS – July 1, 2014
10/23/14 Twenty major upcoming Water Treatment Plants and Manufacturing & Warehousing construction projects - U.S. - October 2014
10/23/14 Twenty major upcoming Alberta and British Columbia construction projects - Canada - October 2014
10/15/14 Trend lines of construction starts in Canada - September 2014
10/15/14 Top 10 largest construction project starts in Canada - September 2014
09/17/14 Twenty major upcoming midwest and northwest construction projects - U.S. - September 2014
09/17/14 Twenty major upcoming medical and educational construction projects - Canada - September 2014
09/17/14 Trend lines of construction starts in Canada - August 2014
09/17/14 Top 10 largest construction project starts in Canada - August 2014
08/15/14 Twenty major upcoming medical and educational construction projects - U.S. - August 2014
08/15/14 Twenty major upcoming industrial and water treatment construction projects - Canada - July 2014
08/15/14 Trend lines of construction starts in Canada - July 2014
08/15/14 Top 10 largest construction project starts in Canada - July 2014
07/24/14 Twenty major upcoming entertainment facility and stadium/arena construction projects - U.S. - July 2014
07/24/14 Twenty major upcoming Ontario and Quebec construction projects - Canada - July 2014
07/24/14 Trend lines of construction starts in Canada - June 2014
07/24/14 Top 10 largest construction project starts in Canada - June 2014
07/16/14
07/14/14 Top 10 largest construction project starts in the U.S. - June 2014
02/03/14 Infographic: Where Can You Use Project Leads in the Construction Process?
07/25/13 The Canadian Economy’s Two Great Blessings
02/15/13 Construction Economic Notes – February, 2013
11/05/12 Recycled-Content Tile
10/05/12 Fiber-Cement Siding
09/18/12 Return on Your Green Home Improvement Investment
08/09/12 Green Building Solutions to Stormwater Runoff
08/07/12 An “Aha” Moment Solves Challenge of Cost Estimating Local Circus Roof
07/19/12 Estimate Types
06/20/12 Ground-Source Heat Pump
05/14/12 Universal Design for Outdoor Living
04/23/12 What Is Universal Design?
04/09/12 Natural Landscaping
03/14/12 Green Material Alternatives for Plumbing Fixtures
03/02/12 Budgeting & Financing Green Construction
02/22/12 Greening Your Firm
02/10/12 Roofing Defects
02/06/12 Roofs: energy efficiency strategies
01/18/12 Commercial Real Estate and Green Construction
12/14/11 Renewable Energy & Distributed Generation Technologies
11/04/11 Tubular Skylights
10/04/11 Are Online Ads An Endangered Species?
09/27/11 Performance Bonds Guarantee Clients Receive Exceptional Service
09/15/11 Deconstruction for Green and Economic Benefit
09/01/11 4 Ways for Businesses to Create a Good First Impression on Twitter
08/11/11 Building Information Modeling (BIM) for Green Building
07/21/11 Green Alternatives for Concrete
07/12/11 Evaluating Products Over Their Life Cycle
06/30/11 Low-Cost Green Strategies
06/28/11 Bricks are from Venus, Clicks are from Mars
06/17/11 Zombie Avoidance Techniques for Building Product Manufacturers
06/08/11 Blogs & Websites: The 5 Signs of Website Wellness
06/06/11 Building Product Manufacturers & Green Products
06/01/11 Is Fear of Sharing Information Costing Your Company Sales?
05/26/11 What Are Green Products?
05/20/11 The Building Envelope
05/16/11 Blogging: Website Heal Thyself
05/03/11 Metals Compared to Wood for Sustainable Construction
04/12/11 Storm Water Collection & Infiltration
03/23/11 Commissioning the Green Building
02/23/11 Building Program for Green Design
01/21/11 Building Deconstruction Process
05/02/11 Why Building Product Manufacturers and Social Media Are a Marriage Made in Heaven
05/06/11 Building Product Manufacturers: How Understanding Architects Can Help Your Business
10/21/09 Distributors & Manufacturer Representatives
07/15/10 Estimating Doors: Tips from the Experts
07/06/10 How to Handle Construction Materials to Prevent Mold
06/21/10 How to Maximize the Benefits of Exterior Security Lighting
06/04/10 SmartBuilding Index
06/01/10 Regional Housing Construction Tracking and Forecast Information
05/28/10 How to Find Regional Construction Tracking and Forecast Information
05/24/10 Building Product Manufacturers
05/18/10 Practicing the Art of Sustainability - Why Atlanta's Current Building Codes Need Updating Now
02/23/10 Learning to use EE
01/11/10 Earn AIA CEU Credit Attending RCD Webcasts
07/17/09 Cost Estimators Winning Work With BIM
07/16/09 Becoming an Invited Bidder - More Tips
07/16/09 Becoming an Invited Bidder - Tips
07/16/09 Becoming an Invited Bidder
07/16/09 SmartBIM Object Modeling Guidelines for Revit
07/15/09 Interference Check and BIM
06/26/09 A Look at Contractor Failure: Part 2
06/19/09 RicciGreene Associates
06/19/09 Doug Thornton AIA, LEED A.P. of AERC, PLLC
06/18/09 A Look at Contractor Failure: Part 1
06/12/09 Owners and SmartBIM Objects – What You Need To Do
06/10/09 Dealing with the IRS
06/05/09 Getting Paid on Construction Contracts
06/02/09 BIM Coordination and Collaboration
05/28/09 Marketing Your Construction Firm on the Cheap
05/20/09 Little Habits with Big Payoffs for Contractors
05/12/09 SmartBIM Spaces
05/07/09 AIA Show Recap as Seen by the SmartBIM Solutions Team
04/27/09 Business Case Study - Survey Of Spending Patterns In Educational Facilities
04/23/09 Taking Advantage of the Recession: Hiring the Right People
04/20/09 Cork as a Green Flooring Option
04/08/09 Owners - It's Time to Substantially Increase Your Architect's and Engineer's Fees
03/05/09 There's a Solution to Performing Time Consuming Quantity Take-Offs
02/20/09 SmartBIM Library is Half-Off for a Limited Time Only
02/09/09 You are Wasting Your Money
01/20/09 Obama: 'Dramatic Action' On Economy Needed
01/14/09 Use of BIM Jumps Dramatically Over Last 12 Months
12/10/08 Minimizing the Size of Family Files (Revit Objects)
11/11/08 Maximize Online Advertising Dollars
11/07/08 Architects and Engineers, WE NEED YOU
10/29/08 Why Do You Need SmartBIM Objects
10/28/08 Why Building Information Modeling?
10/29/08 10 Questions To Ask About BIM Objects
10/08/08 The Object Mess
10/07/08 Implementing BIM to Your Office
10/06/08 Meeting the Needs for Governmental BIM Compliance while Avoiding Current Liability Obstacles
09/15/08 The BIM Transformation is Manageable with the NEW SmartBIM Library v3
09/14/08 KOLBE Windows and Doors vs. Building Information Modeling
09/12/08 The Evolution of Building Information Modeling: BIM 1-2-3
08/11/08 BIM 101 Overview - From Hand Drawings, CAD and now BIM
08/12/08 Draper, Inc. on BIM Object Developments
07/08/08 IFD Library Partners work to establish standards for creators of BIM software
06/23/08 Architectural Education
06/17/08 Parametric Revit Objects – Part I - Fundamentals
06/17/08 Window Glazing Coefficients
06/01/08 Frequently Asked Questions About Building Codes
06/05/08 Calling All Current and Prospective Revit Users - This Blog Is For You
05/06/08 System Requirements for SmartBIM Library
05/06/08 SmartBIM Library 2.0 Release Notes
05/05/08 Building Information Modeling Moves into AEC Mainstream, Adding Value to Project Delivery Process
04/08/08 Flooring: Cost Considerations
02/08/10 General Contractors & Trade Contractors
01/24/08 Building Element Models (BEM)
12/21/07 LEED Certification Primer
12/13/07 Building Integrated Photovoltaics (BIPV)
09/24/07 Mixed-mode Building Design Combines Old and New Ideas
10/15/07 Checklists Identify Potential Envelope Design Improvements
10/24/07 Greenroofs as High Performance Design
10/21/07 What Makes a Building Product Green
10/24/07 Lighting Considerations in Green Building
10/24/07 Water Conservation in Green Buildings
10/24/07 Rainwater Collection Systems
10/24/07 Efficient Cooling Methods for Green Buildings
10/24/07 Controlling Heat Transfer in Green Buildings
10/24/07 Limiting Heat Loss Through Windows
10/23/07 Formaldehyde Use in Building Construction
10/23/07 Using Plants to Improve Indoor Air Quality
11/05/07 Greening Healthcare
10/19/07 Daylighting Controls
10/19/07 Use of Windows, Skylights and Light Pipes in Daylighting
10/19/07 An Overview of Daylighting
10/19/07 An Overview of Solar Ventilation Air Heating
10/19/07 Types of Collectors for Solar Water Heating
10/19/07 An Overview of Solar Water Heating
10/19/07 Cooling Load Advoidance
10/19/07 Components of Passive Solar Heating Designs
10/19/07 An Overview of Passive Solar Heating
10/23/07 Improving Indoor Air Quality
10/19/07 An Overview of The LEED Rating System
10/19/07 Cost Considerations in Building Deconstruction
10/17/07 Building Deconstruction
10/25/07 Roofing Considerations in Green Building
10/19/07 Green Site Selection and Development
10/24/07 Reducing Energy Use in Buildings
10/17/07 Green Demolition
10/18/07 Integrating Solar Power Generation into Buildings using Thin Film PV
09/10/07 Compost Company Promotes Green Environment
03/31/06 Green Roof Sets An Example For Minneapolis Sustainable Design

CMD Group- construction industry news-image” title=