Construction Economic News

Earlier this year ConstructConnect began publishing the Project Stress Index, a proprietary resource that tracks the weekly level of projects failing to move towards expected completion. The strength of the Project Stress Index resides in its ability to monitor the weekly level of projects that have had their bid date delayed, have been put on hold, or have been abandoned.

Earlier this year ConstructConnect began publishing a new data product named the Project Stress Index. The strength of the PSI resides in its ability to monitor the weekly level of projects that have had their bid date delayed, have been put on hold, or have been abandoned. The independent rise and fall in the level of projects experiencing each type of event, along with their interdependent behavior, may better allow market watchers to distinguish normal market volatility from actual turns in the market.

As the banking industry reels from some of the largest bank failures in history, many banks—and in particular regional banks—have quickly tightened their lending standards for fear of making loans that may one day sour. This means that many quality construction firms with good credit histories are being denied loans that they would have received just a year ago.

Supply chain data collected by Federal Reserve banks across the United States have all reported quickening supplier delivery times since at least the end of 2022. In some geographies, supply chain performance has been steadily improving since mid-2022, and the pace at which improvement is occurring continues to accelerate rapidly. The greatest supply chain improvement appears to be along the East Coast, according to data collected by the Federal Reserves of New York and Philadelphia.

The March 10, 2023, collapse of Silicon Valley Bank, followed days later by the failure of Signature Bank, sent shockwaves through financial markets. The cause of their failures was similar in that both experienced dramatic deposits growth in the years just prior to the latest surge in inflation and rates.

The March release of ConstructConnect’s Expansion Index registered another month of impressive gains for the construction industry across both the United States and Canada. At the national level, the U.S. index result reported a sequential month of strong double-digit gains, while Canada’s reading posted a six-month high.

U.S. import prices increased by 0.8% year-on-year for the period ending January 31, 2023. The latest reading is the lowest since 2020, when import prices temporarily contracted due to legislation that shut down the economy, causing a short-lived decline in demand. It marks a near plateau in import prices which, as recently as March 2022, were rising in excess of 13% on an annual basis.

Broad measures of the economy through mid-February continue to signal that consumer and business conditions overall are doing better than were expected just months ago when many were questioning just what kind of recession to expect in 2023. However, broad measures of economic performance can easily hide the strength or weakness of specific industries, including construction.

During the decade between the Great Recession and the coronavirus pandemic (2010 – 2020), the U.S. economy added an average of 180,000 workers monthly. Had this trend not been interrupted by COVID-19, the United States would theoretically have added nearly 6.5 million new workers during the three-year period ending January 2023, cumulating in a total employed persons count of just over 165 million.

Inventory-to-sales levels can be helpful indicators of where the balance between supply and demand stands for various categories of products. If and when wholesaler and manufacturer inventory levels become bloated, it can lead to lower prices downstream for end-users, including trades and general contractors, as upstream suppliers reduce prices to protect their market share from competitors.