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.

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.

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).

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

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

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.

According to the latest Employment Situation Report issued by the Bureau of Labor Statistics, the total number of jobs in the U.S. increased by +210,000 in November. 

In the spring and summer of this year, a huge gap opened between construction bid prices that were staying low on a year-over-year basis and material input costs, also y/y, that were soaring into the stratosphere.  

The vertical bars in Graph 1 tell the story of housing starts in the United States. The monthly numbers of actual groundbreakings in units are seasonally adjusted at an annual rate (SAAR). ‘Annualized’ means they are projected from a single month to 12 months.

U.S. Retail Sales take Exuberant Route There are a lot of explanations for why souped-up inflation has become so troubling in recent months. Heading the list is supply shortages.