The economy of Texas was a standout among states before the recent climb in energy prices. Now, it’s shifted into overdrive.
Since climbing interest rates are a primary concern governing the outlook for construction activity and since the reason interest rates are being adjusted upwards by the Federal Reserve and the Bank of Canada is to slow the economy and dampen demand for many consumer goods, the topic of runaway inflation has taken on huge significance.
The following is a companion piece to an earlier article on construction material cost changes in the United States.
The enormous year-over-year increases in construction material costs evident in the middle of last year have eased substantially entering summer of this year. Last year in June, the average y/y gain for the two Producer Price Index series designed by the Bureau of Labor Statistics to specifically capture construction input costs was +30.0%. The latest average y/y climb, for May 2022, is down by nearly half, to +16.4%.
I usually write the monthly Nuggets report in bullet point form, but this time I’m going to be expository since I’m essentially trying to carry forward a proposition.
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.
Clichés are often true and it is the case that a picture can be worth a thousand words.
May Outdoes April for Megas ConstructConnect announced today that May 2022's volume of construction starts, excluding residential work, was $63.4 billion, an increase of +18.9% versus April’s figure of $53.3 billion (previously reported as $52.6 billion). An increase of nearly one-fifth month to month is about double the usual climb at this time of year due to seasonality (i.e., less inclement weather than in winter, facilitating onsite work outdoors.)