Construction Economic News
The National Association of Realtors January data release, covering activity for December 2022, pointed to a 10th consecutive month of quickly declining U.S. existing home sales. December’s reading of 4.02 million units was hardly different from the 4.01 million units reading, recorded soon after federally mandated lockdowns forced many title and realty offices to cease normal operations. To find an equivalent period, one must return to the worst depths of the Great Recession in mid-2010 to find a period when existing home sales activity was below the latest recorded level.
TD Economics, a division of Toronto Dominion Bank Group, released its latest Canadian Economic Outlook report on January 10, 2023. In it, the bank forecast an 11.7% decline in home prices and an 11% decline in housing starts during 2023. TD’s glum housing outlook is comparable to that of Canadian financial services cooperative Desjardins.
Hourly construction wage data recorded a 5.8% annual gain in December 2022, according to the Bureau of Labor Statistics. Compared to just one month ago, hourly wages rose by 0.42%. In dollar-per-hour terms. These increases represent annual and monthly per-hour gains of $1.80, and $0.15, respectively. These latest readings once again put wage inflation ahead of materials inflation which fell year-on-year to a recent low of 3.3% after increasing briefly by more than 30% YoY in 2021. The history of annualized wage and material cost increases over the years has seen both components successfully contend for the title of leading construction cost driver.
On January 12, 2023, the Bureau of Labor Statistics released its Consumer Price Index results for December, measuring the change in prices of goods and services. To Wall Street’s relief, the numbers pointed to a notable decline in the inflation rate compared to a month ago.
The collective revenues of the 14 largest U.S. publicly-traded firms in the nonresidential construction industry grew at a historic pace during the seven-quarter period between the end of 2020 and the third quarter of 2022, the latest quarter for which actual results are available. Total revenues during the period increased by nearly 50%, with the fastest growth occurring during the second half of 2022 as demand for construction surged.
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 states and metropolitan statistical areas.
In July 2022, the economics team at ConstructConnect reported that the CME Group, the holding company to the Chicago Mercantile Exchange, Chicago Board of Trade, and New York Mercantile Exchange, was soon to bring a new lumber contract product to market. This new product would enable the trading of lumber options in truckload, rather than railcar, quantities.
Total U.S. construction labor supply has grown by 5% since the end of 2019. Despite this growth, the supply of willing laborers is well below the level demanded. Based on data released in the fourth quarter of 2022, there remain nearly 400,000 unfilled construction industry positions. This severe shortage has worsened over the last two years despite some of the largest annual pay increases—but also wage-eroding inflation—for construction workers in decades. The overall labor challenge (shortage) facing construction is not expected to significantly change at the broadest level. However, there are several important intra-industry trends that will force industry leaders to take very different labor strategy tactics in the coming one to two years.
November’s inflation data reported on December 13, 2022, came in below expectations. The basket of goods and services, which are used to broadly track prices, rose 7.1% in the year period ending November. This latest year-on-year rate change is the lowest since prices first began their rapid ascent in early 2021. Furthermore, it marks the fifth consecutive decline in annualized inflation rate readings since June 2022’s decades-high reading of 9.06%.
Only in recent months has a consensus developed that the global economy is likely to contract in 2023. In the Wall Street Journal’s latest survey of 65 highly recognized economists conducted during October, the average nominal U.S. GDP outlook on a seasonally adjusted annualized basis was for declining GDP rates in both the first and second quarters of 2023 before returning to less than 1% growth in the third quarter.