Vol. 17, No. 44 · December 11-15, 2017
Construction input PPIs accelerate in November; job openings, hiring plans increase
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The producer price index (PPI) for final demand in November, not seasonally adjusted, increased 0.1% from October and 3.1% y/y from November 2016, the Bureau of Labor Statistics (BLS) reported on Tuesday. AGC posted tables and an explanation focusing on construction prices and costs. Final demand includes goods, services and five types of nonresidential buildings that BLS says make up 34% of total construction. The PPI for final demand construction, not seasonally adjusted, dipped 0.2% for the month but rose 3.0% y/y. The PPI for new nonresidential building construction—a measure of the price that contractors say they would charge to build a fixed set of five categories of buildings—also rose 3.0% y/y. Increases ranged from 2.6% y/y for office buildings to 3.0% for health care buildings, 3.1% for warehouses and schools, and 4.2% for industrial buildings. PPI increases for subcontractors‘ new, repair and maintenance work on nonresidential buildings ranged from 1.8% y/y for roofing contractors to 2.8% for concrete contractors, 3.6% for electrical contractors and 3.7% for plumbing contractors. The PPI for inputs to construction—excluding capital investment, labor and imports—comprises a mix of goods (59%) and services (41%). This index increased 4.8% y/y, which exceeded the 3.0% PPI increase for new nonresidential building construction, implying a cost squeeze for contractors. The PPI for all goods used in construction (including items consumed by contractors, such as diesel fuel) rose 5.6% y/y, the largest increase in six years, as the sub-index for energy soared 25%, while the PPI for goods less food and energy rose 3.5%. The index for services increased 3.7%. PPIs for inputs to seven types of new nonresidential structures had increases ranging from 4.5% for industrial structures and educational and vocational structures to 6.9% for power and communications structures. PPIs for inputs to new residential structures rose 4.7% y/y for single-family housing and 4.2% for multifamily. Materials important to construction that had notable one- or 12-month price changes include diesel fuel, 2.5% in November and 43% y/y; copper and brass mill shapes, 2.5% and 17%, respectively; aluminum mill shapes, 0.7% and 13%; lumber and plywood, 1.6% and 12%; steel mill products, -1.4% and 8.8%; and plastic construction products, 2.6% and 7.2%.
There were 381,000 job openings in construction, not seasonally adjusted, at the end of October, BLS reported on Monday in its latest Job Openings and Labor Turnover Survey (JOLTS) release. This was the largest October total since 2009. The industry hired 380,000 employees in October, the most for October since 2008. BLS reported on December 8 that there were 467,000 jobseekers in November whose last job was in construction, the lowest November total in the 17-year history of the series. Together, these figures suggest contractors are still eager to hire more workers but are having difficulty finding ones who are qualified. The JOLTS report also showed construction industry layoffs and discharges in November totaled 177,000, the lowest November total since the series began in 2001, while quits totaled 190,000, the most for November since 2005. These figures may mean firms have enough projects ahead that they are not laying off workers and that they are hiring workers away from other construction firms. (Not-seasonally-adjusted data should not be compared to levels for other months when variations may be due to normal weather- or holiday-related patterns. BLS posts series for JOLTS that it calls seasonally adjusted, but the construction openings are identical for the two series.)
Competition for workers is likely to remain active in early 2018, based on the survey of first-quarter 2018 (2018Q1) hiring plans of 11,000 U.S. employers that ManpowerGroup released on Tuesday. The “net employment outlook”—the percentage of employers expecting to add to payrolls less the percentage anticipating a decrease, seasonally adjusted, was “19%—the strongest reported in the past decade….Employers expect to add to payrolls in all 13 industry sectors….employers in the construction and the durable goods manufacturing sectors report the strongest outlooks for more than a decade.” When compared with 2017Q4, construction employers report a “slight improvement in hiring prospects” nationally and in the West; “considerably stronger hiring plans” in the Midwest; “relatively stable hiring intentions” in the Northeast; and “slightly weaker hiring activity” in the South.
The value of U.S. nonresidential construction starts slipped 0.7% from November 2016 to November 2017, the data-tracking firm ConstructConnect reported on Thursday. The cumulative value of starts year-to-date (YTD) from January through November rose 11.5% from the same months of 2016. In descending order of 2017 size, heavy engineering starts jumped 30% YTD; commercial starts slid 3.9%; institutional starts rose 1.6%; and the small industrial (manufacturing) category leaped 80.5%.
Construction of natural-gas liquefaction plants (“trains”) is likely to boost manufacturing construction in 2018. Five liquefied natural gas (LNG) “projects are currently under construction in the United States, and they are expected to increase total U.S. liquefaction capacity…by the end of 2019,” the Energy Information Administration reported in its Today in Energy blog on December 7. These projects are the Cove Point liquefaction terminal in Maryland, Elba Island LNG in Georgia, Cameron LNG in Louisiana, and Freeport LNG and Corpus Christi in Texas.