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ConstructConnect Resources

Construction Economic News

Stay up to date on the latest construction economic news and get in-depth analysis and insights from Chief Economist Alex Carrick and Senior Economist Michael Guckes.

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Michael Guckes, Senior Economist

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Wages in the construction and manufacturing sectors continued to push higher early in the fourth quarter of 2022. The average hourly compensation for all employees in the construction sector ended October 2022 at $35.27, an increase of 13.2% from the end of 2019. Similarly, manufacturing wages have increased from $28.16 at the end of 2019 to $31.23 in October, notching a smaller gain of 10.9%.

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ConstructConnect’s Expansion Index is a monthly measure of the nominal dollar value of planned construction projects compared to the same month one year ago. The Index geographically covers the United States, Canada, and their respective states and metropolitan statistical areas. November’s release, which reports on data collected in the prior month, extended several of the industry trends that ConstructConnect has previously identified.

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In mid-2022, overall inflation by some measures was approaching 9%, a 40-year high following more than a decade of historically low inflation rates. However, for manufacturers, distributors, and others purchasing raw materials, 9% annual inflation pales in comparison to the kinds of price swings these firms experienced for their raw materials beginning in mid-2020. For construction firms and product manufacturers, the last two years have been spent trying to raise output prices fast enough and high enough to cover rapidly increasing input costs.

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The relationship between manufacturers, wholesalers, and end customers has been well documented over the last many decades. To speed the delivery of products to end users, wholesalers preemptively store finished products for quick sale. At the same time, wholesalers can decide whether or not to order replacement inventory from manufacturers which results in further orders to their suppliers. This movement of orders and materials takes time which can be a risk for both manufacturers and wholesalers when economic market conditions rapidly change.

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ConstructConnect’s Expansion Index is a monthly measure of the dollar value of planned or ‘contemplated construction projects compared to the same month one year ago. The Index geographically covers Canada, the United States, and their respective metropolitan statistical areas.

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Return on investment is an essential component in the decision-making process of owners and developers of new construction projects, as it measures the difference between the income stream from an investment and its cost, usually on an annual basis. As such, a construction project can raise its ROI by either increasing its income-generating ability or by decreasing its construction costs and/or operational expenses.

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As ConstructConnect has reported previously, the markets for single and multi-family homes have taken divergent paths in recent months. In large part, this has resulted from sweeping interest rate increases coupled with recent years of strongly rising home prices.

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While the business cycle impacts virtually all businesses, the timing of its impact can vary between industries. In my past work as a Chief Economist in the manufacturing sector, I carefully studied and wrote about the manufacturing business cycle between 2017 and early 2022. During this time—and as in prior business cycles—it was very clear that changes in new orders for manufactured products led all other components of manufacturing activity.

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Large U.S. domestic banks at the start of September 2022 had $1.46 trillion* in commercial and industrial loans outstanding; representing an 18% increase from a year ago. This marks the fastest expansion in C&I loans from the large banks category since 2008.

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Much has been made of the efforts by the U.S. Federal Reserve Bank to raise interest rates in order to cool down price inflation without also sending the overall economy into a recession. Achieving this feat will be a considerable task as it requires the right balance of slowing down the various elements of total economic activity, as measured by Gross Domestic Product without sending it into reverse.

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