Submitted by the AGC.
Contractors’ input costs declined sharply, on balance, in December, as decreases in fuel, lumber, steel, and trucking costs outweighed increased prices for copper, aluminum, and concrete products, according to Bureau of Labor Statistics (BLS) data posted on Wednesday. The producer price index (PPI) for material and service inputs to new nonresidential construction declined for the sixth time in seven months, by 1.8%. The PPI for goods inputs sank 2.7%, the largest one-month drop since November 2008. Nevertheless, the materials and services index rose 7.2% year-over-year (y/y)—slightly outpacing the 6.5% increase in the consumer price index, the most widely watched measure of inflation. The PPI for inputs to new residential construction fell 1.2% for the month but increased 6.9% y/y. There were notable one-month declines in PPIs for diesel fuel (-29%, but up 20% y/y), lumber and plywood (-3.7% for the month and -20% y/y), steel mill products (-2.7% and -29%, respectively), and truck transportation of freight (-1.7% and 8.2%). The PPI increased by more than 1% from November for copper and brass mill shapes (1.5% for the month but down 3.6% y/y), ready-mixed concrete (1.4% for the month and 13.6% y/y—the most since 2006), and aluminum mill shapes (1.3% and 5.7%). The PPI for new nonresidential building construction—a measure of the price that contractors say they would bid to build a fixed set of buildings—was flat for the month and up 19.4% y/y. AGC posted tables of construction PPIs.
Some price declines may be short-lived. Producers of hot-rolled coil, from which some construction steel is made, have posted two price increases since early December. Copper and aluminum futures have risen sharply on commodities exchanges. A reader forwarded a December 27 letter from USG announcing, “All Commercial and Retail ceiling panels will increase up to 8% including Mineral Wool panels, Fiberglass panels and Gypsum panels,” effective February 6. Readers are invited to send information about input prices and supply-chain issues to firstname.lastname@example.org.
“After 25 consecutive months of year-over-year declines, U.S. hotel construction increased slightly [0.3% y/y] in December,” data analytics firm STR reported on Wednesday. Rooms in “final planning” increased 15% y/y but rooms in “planning” fell 16%. While New York City “has the most rooms in construction as a percentage of existing supply, the market will likely see a slowdown after ongoing projects are built due to new development restrictions in place. Nashville is also showing signs of a slowdown, so we could expect a shuffle in the top pipeline markets later in 2023.”
Housing starts (units) in December declined 1.4% at a seasonally adjusted annual rate from the November rate and 22% y/y, the Census Bureau reported on Thursday. Single-family starts jumped 11% for the month but slumped 25% y/y. Multifamily (five or more units) starts tumbled 19% for the month and 16% y/y. Residential permits skidded 1.6% for the month and 30% y/y. Single-family permits declined for the 10th month in a row, by 6.5% from November and 35% y/y. Multifamily permits rose 7.1% for the month but sagged 22% y/y. There were 926,000 multifamily units under construction in December, the most in series history dating to 1970. The figure was the 17th-straight monthly increase, up 1.0% for the month and 25% y/y. However, the y/y plunge in starts and permits suggests construction is likely to decline once current multifamily projects wrap up.
“Economic activity [from mid-November to January 9] was relatively unchanged since the previous report,” the Federal Reserve reported on Wednesday in its latest “Beige Book.” The Beige Book is a compilation of informal soundings of business and nonbusiness sources in the 12 Fed districts. “Housing markets continued to weaken, with sales and construction declining across Districts. Commercial real estate activity slowed slightly, on average, with more notable weakening in the office market. [Some] bankers said higher borrowing costs had begun to dampen commercial lending.”
Union membership in the construction industry inched down by 5,000 (0.5%) from an annual average of 1,024,000 in 2021 to 1,019,000 in 2022, BLS reported on Thursday. Total construction industry employment averaged 8,671,000 in 2022, an increase of 514,000 (6.3%) from 2021. As a result, the rate of unionization declined from 12.6% 2021 to 11.7% in 2022. The number of employees represented by unions—including workers who report no union affiliation but whose jobs are covered by a union or an employee association contract—totaled 1,112,000 (13.6% of all construction industry employees) in 2021 and 1,076,000 (12.4%) in 2022.