Construction Economic News
There are few indicators that serve as a better barometer of the health of America’s manufacturing sector than the Institute for Supply Management’s New Orders Index. Each month the ISM surveys thousands of manufacturers, asking them if their latest month’s orders are up, the same, or down compared to the prior month.
According to CME Group, an American global markets company and exchange operator, and The Wall Street Journal, CME Group will be introducing a new futures contract using ticker “LBR” starting as early as August 2022. This could be a significant benefit to smaller sawmills along with general and trades contractors involved in housing construction. Among the primary reasons are:
Excluding the extraordinary events of mid-2020 caused by the onset of COVID-19, net issues of corporate debt from the United States by nonfinancial sources contracted during the first quarter of 2022.
Earlier this month Amazon canceled or delayed the construction of over a dozen new warehouse structures. This news comes not long after the company posted its first quarterly pre-tax income loss since 2014; however, this was in part a result of the company’s acquisition of MGM Studios in early 2022. Excluding the acquisition, income from continuing operations was reported for Q1 2022 at $-3.84 billion.
The last two years of supply chain disruptions have offered a real-world paradigm about the fundamentals of supply and demand and their absolute influence on prices. Among the many construction materials which have experienced extreme price fluctuations since 2020, few have been more volatile than lumber. Soaring demand for residential construction in recent years coupled with COVID-induced capacity reductions has seen wholesale lumber prices cycle through several rounds of extreme price hikes followed by significant declines.
ConstructConnect’s Expansion Index, a monthly measure of the dollar value of construction projects in planning compared to the same month one year ago, registered 15% overall expansion in Canada and 10% in the United States for the month of May 2022. The latest Canadian reading was the highest in the year-to-date period and marks the 11th consecutive month of double-digit index expansion. The May reading in the United States was similarly impressive, setting a 10-month high.
In Difficult and Unprecedented Times Knowledge is Power The reverberating and long-run effects of the immediate actions taken by world leaders during 2020 and afterward were always going to be difficult—if not impossible—to foresee. However, 2022 is certainly the leading year in which many of the unanticipated consequences of those decisions have come to the fore.
The Bureau of Labor Statistics released disappointing news on June 10, as it reported that overall prices increased by a record 8.6% during the 12-month period ending in May 2022. The news sent the Dow Jones Industrial Average down almost 900-points for the day. Yet this difficult news on overall inflation fails to capture an important truth which is that not all prices rise at the same time and certainly not to the same degree.
In my recent article about non-dollar metrics, I described how the inflation-adjusted value of unfilled orders, new orders, and inventory are all at record current-day dollar amounts; yet when these readings are converted to 2019 equivalent dollars we actually see a decrease in inventories, new orders, and unfilled orders.
In a recent article, Construction Industry Still Facing Supply Chain & Manufacturing Issues, I explained how the dollar value of new orders and unfilled orders have grown at double-digit rates since their pre-pandemic highs. Yet, due to extreme price inflation for construction materials over the same period, these seemingly significant dollar value gains don’t represent an equal size increase in the quantity of materials being ordered.