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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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Omicron! A word that is perfect for the times. It would be easy to imagine it originating in some fictitious techno-saturated supervillain universe that has risen to prominence in popular culture. Seemingly, it’s a virus label chosen to generate maximum angst.

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North America’s four major stock market indices experienced another year of outstanding success in 2021. Never mind the pandemic or the fact rampant inflation is causing central banks to consider bringing forward interest rate hikes, the Dow Jones Industrial Average index and the S&P 500 both established new record highs in December. NASDAQ and the Toronto Stock Exchange ended the year down only a little from the all-time peaks they set a month earlier in November.

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2021 was a good year for housing starts in the United States. In Canada, it was an outstanding year. Through the first 11 months of 2021, in America, average monthly new home groundbreakings, seasonally adjusted at an annual rate (SAAR), were +15.4% versus January-November 2020.

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Well before the pandemic, the construction sector was worrying over what was perceived as an acute shortage of labor. Much of the discussion on this topic over the past several years has been anecdotal. Or reference has been made to employment gains that have been less than they should be and unemployment rates that have sometimes turned spectacularly low.

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To tackle a +6.8% year-over-year CPI inflation rate, the Federal Reserve has stated it will be pursuing QT rather than QE in the year ahead, quantitative tightening rather than easing, and that there may be as many as three upwards adjustments to interest rates. On the residential construction side, the expectation of higher interest rates may counterintuitively speed up groundbreakings for a while as prospective new homeowners try to beat the financing cost increases.

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Estimates of U.S. real (i.e., after inflation) gross domestic product (GDP) growth for this year have generally been revised down recently, by well-known forecasting agencies, from a range between +6% and +7% to a cooler +5%. Supply shortages have cut into output levels in many industrial sectors. And bad news about coronavirus variants is putting a damper on reopening efforts.

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November Light on Megaprojects ConstructConnect announced today that November 2021's volume of construction starts, excluding residential work, was $30.4 billion (see shaded green box, bottom of Table 8 below), an increase of +1.7% compared with October 2021's level of $29.9 billion (originally reported as $28.8 billion).

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Clichés are often true and it is the case that a picture can be worth a thousand words.

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The accompanying table records the top 10 project starts in the U.S. for November 2021.

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The DJI, S&P 500, NASDAQ, and TSX have been setting new record highs in each successive month on a regular basis since the early days of the pandemic. Nor did November fail to deliver success on that score once again. In the latest month, new peaks were established by the four major indices.

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