"Reports from the 12 Federal Reserve districts indicated that the economy continued to expand from late November through the end of the year, with 11 districts reporting modest to moderate gains and Dallas recording a robust increase," the Federal Reserve reported on Wednesday in its latest "Beige Book." The report is a compilation of informal soundings of business conditions in each of the districts, which are referenced by the name of their headquarters cities. The summary includes these comments relevant to construction: "Residential real estate activity remained constrained across the country. Most districts reported little growth in home sales due to limited housing inventory. Nonresidential activity continued to experience slight growth....Several districts noted elevated demand for manufacturing and construction labor....Reports of pricing pressures were mixed across the country although several districts noted increases in manufacturing, construction, or transportation input costs." AGC excerpted construction-related comments from each district.
Prices for construction inputs continue to rise. Late on Thursday, a Florida-based reader received a letter from Gerdau, stating, "Effective with new orders January 19, 2018, Gerdau Long Steel North America will be increasing the transactional price of [rebar] products" in Florida by $40 per ton. The reader commented, "This makes a $100 per ton worth of increases since December 15, 2017. Imports are down 97%...and domestic mills are working at capacity. We are expecting some spot shortages of rebar over the next month." The Energy Information Administration reported on Tuesday that the national average retail price of diesel fuel on Monday was $3.03 per gallon, the first time in three years it had topped $3, and a 44-cent (17%) increase from a year ago. Concrete and cement pricing "in late 2017 and into 2018 is expected to continue to march upwards," investment analyst Thompson Research Group (TRG) reported on Thursday in its quarterly survey of industry producers. "In general, aggregate and cement pricing prospects remain positive into 2018. Cement pricing is more promising given the capacity constraints in that market, in addition to tight fly ash supply...We had a handful of contacts in the Southeast note that it has been increasingly challenging to get fly ash" from coal-fired power plants. As those plants shut down, the supply of raw material for gypsum products also shrinks. Regarding price expectations for 2018, all aggregates and cement respondents expect increases, though mostly of 5% or less. On Tuesday, TRG reported in its quarterly building products survey of the steel stud, wallboard, insulation, ceiling, and flooring industries, "Multiple price increases have been announced for January 2018: 70% of respondents expect at least a portion of the [15-20% January] wallboard price increase to be 'partially successful'; 64% of respondents expect the resi[dential] insulation price increase to be 'partially successful'; 60% of respondents expect the steel stud price increase to be 'partially successful'....Inflation is viewed as more inevitable than just 'likely' in 2018....We have seen a greater number of price increase announcements earlier in the year....While there is always room for negotiation, we are hearing of less pushback on these building product price increases in general....Another 5-7% [roofing] price increase has been announced for March." Readers are invited to send price change announcements to email@example.com.
The percentage of construction industry employees who were members of unions increased slightly in 2017, from 13.9% in 2016 to 14.0% (1,102,000 out of 7,844,000 employees), the Bureau of Labor Statistics reported today. Similarly, the percentage of employees represented by unions (including 54,000 workers who report no union affiliation but whose jobs are covered by a union contract) increased from 14.6% to 14.7%. About 35% of construction industry employees work for home builders, home remodeling and residential specialty contracting firms, which have very small union shares. Employment in these firms increased more than for multifamily and nonresidential construction firms in 2017; thus, the 2017 union share of the latter firms was probably around 22% and increased from 2016. The percentage of workers in construction and extraction occupations who were members of unions increased from 18.4% in 2016 to 19.3% in 2017. The percentage who were represented by unions increased from 19.4% to 20.2%. Median weekly earnings of nonunion construction industry employees increased by 2.2% to $797. Earnings of construction industry union members decreased 0.4% to $1,163 (46% more than the median for nonunion employees). Median weekly earnings of construction industry employees represented by unions increased by 0.8% to $1,155 (45% more than the median for nonunion employees). Median weekly earnings of workers in construction and extraction occupations who were members of unions decreased 1.5% in 2017. Earnings of workers who were represented by unions increased 0.8%. Earnings of nonunion employees increased 2.2%. The decline in union workers' median earnings and the modest increase for nonunion employees may reflect retirement of high-paid workers and an influx of new, lower-paid workers and/or a change in the mix of crafts toward lower-paid crafts.
Gross output by construction firms slipped by $6 billion (0.4%) to $1,453 billion at a seasonally adjusted annual rate in the third quarter of 2017 (Q3) from Q2, the Bureau of Economic Analysis reported today. This number includes all receipts, including site preparation, repairs and other activities excluded from the Census Bureau's definition of construction put in place. The price index for gross output in construction increased by 4.1% in Q3 at a seasonally adjusted annual rate, up from 2.7% in Q2 and well above the all-industry increase of 1.6% in Q3. Real (inflation-adjusted) gross output in construction declined at a seasonally adjusted annual rate of 5.5% in Q3, but this was a smaller decrease than the 8.1% drop in Q2. Value added in construction (sales to other industries, government and households) totaled $828 billion in Q3, 4.2% of gross domestic product. The difference between gross output and value added represents sales to other construction firms, for instance by subcontractors to general contractors.