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Construction & Materials Outlook
Austin Chapter – AGCFebruary 25, 2011
Ken Simonson, Chief EconomistAGC of America
Current economic influences on construction• GDP, personal income: gradual acceleration• Continuing problems for office, retail, warehouse• Loans for developers remain tight-to-unavailable• State/local spending: infrastructure not a priority• Federal spending helped but may decline soon• Price spikes for diesel, copper, possibly steel
2
Federal funding sources and outlook• Stimulus: 61 programs, totaling $135 billion; at peak now• Base realignment: at peak now, due to end 9/30/11• Gulf Coast hurricane work: at peak, due to end 6/1/11• Highway, airways trust funds: on short-term extension• Water, wastewaster state revolving funds: flat or down
3
Construction-related stimulus funding (~$135 bil.)$49 billion
up to $35 billion
$30 billion
$21 billion
4
Construction spending: trend, latest level, 12-mo. changeSeasonally adjusted annual rate (SAAR), March 2006-December 2010
▬ Total Construction: $788 billion, -6%
▬ Public: $301 billion, 0%
▬ Private Nonres: $260 billion, -12%
▬ Private Residential: $226 billion, -7%
5Source: Census Bureau construction spending reports
Nonres totals (billion $, SAAR), share & 12-month change12/10 Total Share 12/09-12/10
Nonresidential $552 billion 100% - 6
Power 96 17 + 13
Highway and street 85 15 + 8 Educational 81 15 - 11 Transportation 39 7 + 1 Health care 39 7 - 6 Commercial 38 7 - 19 Manufacturing 34 6 - 25 Office 33 6 - 26 Sewage and waste disposal 25 5 + 4 Communication 18 3 - 9 Amusement and recreation 17 3 + 4 Other (water, public safety; lodging; conservation; religious): 9% of total
6Source: Census Bureau construction spending report
Construction spending: public works (billion $, SAAR)
7
Latest 1-mo. change: -1.6%, 12-mo.: 8% Latest 1-mo. change: -2.1%, 12-mo.: 4%
Latest 1-mo. change: 0.8%, 12-mo.: 0% Latest 1-mo. change: -2.8%, 12-mo.: 0%
Source: Census Bureau construction spending reports
Construction spending: institutional (private + state/local)
8
Latest 1-mo. change: -4.1%, 12-mo.: -7% Latest 1-mo. change: 0.3%, 12-mo.: -4%
Latest 1-mo. change: -2.3%, 12-mo.: -17% Latest 1-mo. change: -6.4%, 12-mo.: -23%
Source: Census Bureau construction spending reports
Construction spending: industrial, heavy (billion $, SAAR)
9
Latest 1-mo. change: 2.1%, 12-mo.: 13% Latest 1-mo. change: -1.5%, 12-mo.: -25%
Latest 1-mo. change: 1.6%, 12-mo.: -9% Latest 1-mo. change: -4.9%, 12-mo.: 4%
Source: Census Bureau construction spending reports
Construction spending: developer-financed (billion $, SAAR)
10
Latest 1-mo. change: 0.1%, 12-mo.: -18% Latest 1-mo. change: 0.2%, 12-mo.: -27%
Latest 1-mo. change: 4.6%, 12-mo.: -29% Latest 1-mo. change: -5.2%, 12-mo.: -49%
Source: Census Bureau construction spending reports
Economic impact of nonresidential construction• Jobs: 28,500 per $1 billion
• 1/3 direct, onsite construction• 1/6 indirect (quarries, mfg., services)• 1/2 “induced” by spending from higher earnings of
construction, indirect workers and owners• GDP: $3.4 billion• Personal earnings: $1.1 billion
11Source: Prof. Stephen Fuller, George Mason University
▬ Nonresidential1-mo: -1.1%, 12-mo: -1.9%
▬ Residential1-mo: 0.2%, 12-mo: -4.4%
Construction and total private employment, 2008-Jan. 2011
12
Latest 1-mo. change: -0.6%, 12-mo.: -2.3% Latest 1-mo. change: 0.0%, 12-mo.: 1.2%
Latest 1-mo. change: -0.8%, 12-mo.: 1.6%
Source: Census Bureau construction spending reports
13Source: BLS state and regional employment report
-2%
-4%
-6%
-12%
-5%
0.5%
-19%
-1%
-5%
-2%
-1%
-2%
-2%
5%
9%
6%
-5%
1%
-9%
2%
-6%
-1% -7%
-10%
1%
-4% -4%
-5%
-1%
-0.1%
-4%
-6%
-8%
-6%
1%
-9%
2%
-2%
-3%
VT0%
CT-7%
RI-7%
DE4%
NJ-4%
MD2%
DC3%
NH4%
-10 to -19% -3 to -9% -0.1 to -2% 0 to 9%
MA1%
State Construction Employment Change (U.S.: -3%) 12/09 to 12/10 (seasonally adjusted)
Source: BLS 14
Construction Employment Change from Year AgoNot seasonally adjusted (NSA)
Source: BLS 15
Austin-Round Rock-San Marcos -4%162 out of 337
U.S. -3%
Texas 6%2 out of 51
Change in construction employment, 12/09-12/10
Metro area or division12-mo. empl. change (NSA)
Rank(out of 337)
Statewide 6% -Austin-Round Rock-San Marcos* -4% 162Beaumont-Port Arthur* 6% 12College Station-Bryan* 6% 12Corpus Christi* 5% 21Dallas-Plano-Irving, Div.* 2% 48El Paso* 5% 21Fort Worth-Arlington, Div.* -1% 107Houston-Sugar Land-Baytown -1% 107Longview* 5% 21McAllen-Edinburg-Mission* 0% 68Midland* 4% 31Odessa* 5% 21San Antonio-New Braunfels -0.2% 106
*Mining and logging included with construction
Source: AGC rankings, calculated from BLS state and area employment reports 16
Construction employment, wages, costs and output prices
17
not seasonally adjusted, █ construction █ total 12-mo. % change, 2008-Jan. 2011 (1/10-1/11: 4.9%)
4-quarter % change, 2008-4Q 2010 (4Q09-4Q10: 0.9%) 12-mo. % change, January 2010-Januray 2011
Source: BLS employment, employment cost index, producer price index (PPI)
Unemployment rates, Jan. 2008-Jan. 2011 Producer price index for construction inputs
Employment cost index for construction PPI for construction inputs, finished buildings
CPI vs. PPI for construction inputs, new offices
18Source: Author, based on BLS producer and consumer price index reports
Producer price indexes, 1/08-1/11
19
Latest 1-mo. change: 3.2%, 12-mo.: 17.7% Latest 1-mo. change: 2.0%, 12-mo.: 11.5%
Latest 1-mo. change: 3.3%, 12-mo.: 9.9% Latest 1-mo. change: 1.0%, 12-mo.: 9.2%
Source: BLS producer price index reports
Producer price indexes, 1/08-1/11
20
Latest 1-mo. change: 0.1%, 12-mo.: 3.3% Latest 1-mo. change: 0.1%, 12-mo.: 0.0%
Latest 1-mo. change: -3.3%, 12-mo.: 0.5% Latest 1-mo. change: 2.0%, 12-mo.: 7.4%
Source: BLS producer price index reports
Outlook for materials• Industry depends on specific materials that:
• are in demand worldwide• have erratic supply growth• are heavy, bulky or hard to transport
• Construction requires physical delivery• Thus, industry is subject to price spurts, transport
bottlenecks, fuel price swings• Expect periods of 6 to 8% PPI increases
21Source: Author
Latest 1-mo. change: -5.3%, 12-mo.: -28%
Single- vs. multi-family, 2008-11, seasonally adjusted annual rate (SAAR)Single-family & improvements spending
▬ SF (1-mo 0%, 12-mo -4%), ▬ Imp (1-mo -8%, 12-mo -6%)
Multi-family permits & starts
▬ Permits (1-mo -24%, 12-mo 18%)▬ Starts (1-mo 78%, 12-mo 81%)
Single-family permits & starts
▬ Permits (1-mo -5%, 12-mo -17%)▬ Starts (1-mo -1%, 12-mo -19%)
Source: Census Bureau construction spending, housing starts reports 22
Housing outlook• SF: starts, permits should rise gradually in ’11• MF: Upturn has begun, should accelerate in ’11
- Rental demand should rise as more people get jobs or move to military base realignment sites
- Condo market continues to have large overhang- Banks remain unwilling to lend to developers
23Source: Author
AGC/Navigant Consulting Construction Outlook Survey
24Source: AGC/Navigant Consulting, Inc Survey, 1/25/2011
Did you add or lay off employees in 2010? Do you plan to add or lay off workers in 2011?
AGC/Navigant Consulting Construction Outlook Survey
25Source: AGC/Navigant Consulting, Inc Survey, 1/25/2011
Have you adjusted your bids in 2010 so that profits are:
Do you plan to adjust your bids in 2011 so that profits are:
Compared to 2010, do you expect the available dollar volume of projects you compete for in 2011 to be:
Power Hospital/ higher
education
Water/ sewer
Public building
Manu-facturing
Retail ware-house
lodging
K-12 school
Highway Other trans-
portation
Private office
Higher
Same
Lower
26Source: AGC/Navigant Consulting, Inc Survey, 1/25/2011
AGC/Navigant Consulting Construction Outlook Survey
27Source: AGC/Navigant Consulting, Inc Survey, 1/25/2011
When do you expect the construction market to again grow?
Summary for 2011• Nonres spending: 0 to +5% (less stimulus; weak state-
local; more warehouse, hotel, hospitals, higher ed)
• Res: +5 to +10% (SF up a bit, MF accelerating)
• Total construction spending: +3 to +7%
• Materials costs: +3% to +8%
• Labor costs: +2.5% or less
28Source: Author
AGC economic resources (email [email protected])• The Data DIGest: weekly 1-page email
(subscribe at: www.agc.org/datadigest)
• PPI tables: emailed monthly
• State and metro data, fact sheets
• Stimulus info: www.agc.org/stimulus
• Webinars (next: 3/3 with AIA, Reed)
• Feedback on stimulus, credit, costs
29