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Construction Spending, Labor & Materials Outlook
NASFA WebinarJanuary 12, 2016Ken Simonson
Chief Economist, AGC of Americasimonsonk@agc.org
0
1,500
3,000
4,500
6,000
7,500
9,000
2006 2008 2010 2012 2014$0
$250
$500
$750
$1,000
$1,250
2006 2008 2010 2012 2014
Total spending, Feb. ‘06 (peak)‐Nov. ‘15billion $, seasonally adjusted annual rate (SAAR)
Construction spending & employment, 2006‐15Total employment, Apr. ’06 (peak)‐Dec. ‘15
thousands, seasonally adjusted
$1.21 trillion $1.12 trillion(7% below peak)
7.7 million
6.5 million
Private Residential
Total
Public
Private nonresidential
Nonres (10% below peak)
Residential (27% below peak)
Total (15% below peak)
November 2014‐November 2015: Total: 10%private res. 11%, private nonres. 14%, public 6%
December 2014‐December 2015: Total: 4.2%, residential 5.7%, nonresidential 3.2%
Source: U.S. Census Bureau (spending); Bureau of Labor Statistics (employment)
‐20%
0%
20%
40%
60%
2011 2012 2013 2014 2015
12 m
onth % change
$0
$100
$200
$300
$400
$500
2011 2012 2013 2014 2015 2016
Billion
$ ($
B)
seasonally adjusted annual rate (SAAR): Jan. ‘11 ($238 B)‐Nov. ’15 ($428 B)
Private residential spending: MF continues to outpace SF
Multifamily (MF)(Nov. ‘15: $57 B)
Single family (SF)(Nov. ‘15: $227 B)
Improvements(Nov. ‘15: $144 B)
Improvements: 8%Single family: 9%
Multifamily: 25%Total: 11%
Source: Census Bureau construction spending reports
12‐month % change: January 2011 (‐5.3%)‐November 2015 (10.8%)
2016 residential spending forecast: 5‐9%• SF: 6‐9%; ongoing job gains add to demand; student debt, fears of lock‐in, limited supply will cap growth
• MF: 8‐12%; upturn should last through 2016– low vacancies, high rent growth encourage investors– millennials show continued preference for cities– nearly all MF construction is rental, not condo– public MF is growing but remains tiny (1% of total)
• Improvements: 0‐10%; newly corrected Census data shows loose relationship to SF spending
Source: Author
0.2%
1.5%
1.5%
0.9%
1.2%
0.9%
0.3%
1.9%
1.5%
1.9%
‐0.02%
2.3%
0.6%
0.7%
0.3%
0.8%
1.8%
0.6%
0.5%
0.3%
0.5%
0.2%
‐0.2%
0.1%
0.3%
0.3%
‐0.04% 0.3%
0.1%
0.2%
0.1%
0.7%
1.0%
1.2%
1.8%
‐0.1%
‐0.3%
0.4%
1.7%
HI0.8%
1.4%
VT‐0.1%
CT‐0.1%
RI0.1%
DE1.1%
NJ0.2%
MD0.5%
DC1.9%
NH0.2%
decrease 0‐0.49% 0.5‐0.99% 1.0‐1.49%
MA0.6%
Population change by state, July 2014‐July 2015 (U.S.: 0.79%)
1.5%+
Source: U.S. Census Bureau, December 22, 2015
0.8%
AGC members’ expectations for 2016Net % who expect dollar volume of projects to be higher34% All projects 12% K‐12 school21% Retail/warehouse/lodging 12% Public building19% Private office 8% Water/sewer19% Hospital 6% Highway14% Multifamily 3% Other transportation13% Higher education 1%
‐1%PowerDirect federal construction
Source: AGC Construction Outlook Survey, Jan. 2016 (1,580 total responses)
Jan.‐Nov. YTD 2015 vs. 2014
July‐Nov. 2015 annualized
2016 and 2017 (per year)
Nonresidential total (public+private) 9 % ‐2 4‐8%Power (incl. oil & gas structures, pipelines) ‐15 ‐16 0 to 10Educational 7 8 3 to 5Highway and street 7 ‐2 1 to 4Manufacturing 47 ‐10 ‐10 to +10Commercial (retail, warehouse, farm) 8 14 0 to 10Office 22 7 5 to 15Transportation 8 2 0 to 5Health care 5 1 3 to 8Sewage and waste disposal 9 ‐24Amusement & recreation 26 ‐20Lodging 31 8 ‐10 to +15Other (communication; water; public safety; conservation; religious): 8% of total 0 6
Nonresidential segments: year‐to‐date, 2016‐17 forecast
Source: Census Bureau construction spending report; Author’s forecast
$0$10$20$30$40$50
2008 2009 2010 2011 2012 2013 2014 2015
$0$20$40$60$80$100
2008 2009 2010 2011 2012 2013 2014 2015
Power (88% private)
$0$20$40$60$80$100
2008 2009 2010 2011 2012 2013 2014 2015
Manufacturing (99% private)
$0$10$20$30$40$50
2008 2009 2010 2011 2012 2013 2014 2015
Construction spending: industrial, heavy (billion $, SAAR)
Source: Census Bureau construction spending reports
Transportation facilities (70% public) Public & private transportation facilities
Latest 12‐mo. change: 3% Latest 12‐mo. change: private 7%; public 2%
Public
Private
Latest 12‐mo. change: 5% (oil & gas 29%; electric ‐4%)
Electric
Oil & Gas
Total
Latest 12‐mo. change: 29% (chemical 39%; other 19%)
Other
Chemical
Total
Key points: power, mfg., transportation• Cutbacks in coal‐fired plants, oil & gas fields have hit bottom; surge in gas‐fired plants, pipelines into ‘18
• Mfg growth led by chemicals (petrochemical plants, ethane crackers, LNG) and transportation equipment (cars, light & heavy trucks, jets, railcars, barges); cuts in plants tied to farming, mining or exports
• Private (mainly rail) investment in transportation will slow; flat funding for public airports, ports, transit
Source: Author
$0
$30
$60
$90
2008 2009 2010 2011 2012 2013 2014 2015
$0
$10
$20
$30
2008 2009 2010 2011 2012 2013 2014 2015$0
$10
$20
$30
2008 2009 2010 2011 2012 2013 2014 2015
$0
$10
$20
$30
2008 2009 2010 2011 2012 2013 2014 2015
Construction spending: public works (billion $, SAAR)
Source: Census Bureau construction spending reports
Highways (99.6% public)
Amusement & recreation (48% public)
Sewage/waste (99% public)
Water supply (96% public)
Latest 12‐mo. change: 5% Latest 12‐mo. change: ‐2%
Latest 12‐mo. change: 16% Latest 12‐mo. change: ‐5%
Key points: roads, recreation, sewer/water• Only slight rise in federal highway funding even with long‐term bill; gradual pick‐up in state funding & P3s
• Amusement & recreation spending is very “lumpy”—a few big stadiums at irregular intervals; but funding for local, state, federal parks keeps eroding
• Eastern & Midwestern cities under orders to make long‐term upgrades to sewer systems that should boost spending; water utilities hurt by drought, conservation
Source: Author
$0$20$40$60$80$100
2008 2009 2010 2011 2012 2013 2014 2015
$0$10$20$30$40$50
2008 2009 2010 2011 2012 2013 2014 2015
Total education (79% public)
$0$10$20$30$40$50
2008 2009 2010 2011 2012 2013 2014 2015
$0$20$40$60$80$100
2008 2009 2010 2011 2012 2013 2014 2015
Construction spending: institutional (private + state/local)
Source: Census Bureau construction spending reports
Total healthcare (77% private)
Education (state & local K‐12, higher; private)
Hospitals (private, state & local)
Latest 12‐mo. change: 14%
Latest 12‐mo. change: 5% Latest 12‐mo. change: private 18%; state & local ‐8%
S/L preKindergarten‐12th grade
Private
S/L higher ed
S/L
Private
Latest: state/local preK‐12 24%, higher 7%; private 9%
Key points: education & health care• Higher‐ed enrollment is shrinking, so colleges need fewer dorms & classrooms; apts. (MF) replacing dorms (ed.)
• PreK‐12 enrollment is flat; more children staying in cities and filling underused or charter schools, so construction no longer matches population growth
• Hospitals face more competition from standalone urgent care, outpatient surgery, clinics in stores; more investment in small facilities, short stays
Source: Author
$0
$20
$40
$60
$80
2008 2009 2010 2011 2012 2013 2014 2015
$0
$10
$20
$30
$40
2008 2009 2010 2011 2012 2013 2014 2015$0
$10
$20
$30
$40
2008 2009 2010 2011 2012 2013 2014 2015
$0
$20
$40
$60
$80
2008 2009 2010 2011 2012 2013 2014 2015
Construction spending: developer‐financed (billion $, SAAR)
Source: Census Bureau construction spending reports
Retail (private)
Warehouse (private)
Office (86% private)
Lodging (private)
Latest 12‐mo. change: ‐1%
Latest 12‐mo. change: 6% Latest 12‐mo. change: 28%
Latest 12‐mo. change: 21% (private 23%; public 7%)
Private
Public
Total
Key points: retail, warehouse, office, hotel• Retail now tied to mixed‐use buildings & renovations, not standalone stores or shopping centers; consumer pivot to online buying will continue
• Warehouse market largely built out for now but may heat up if Panama Canal changes distribution lanes
• Employment sets records each month but office space per employee keeps shrinking; growth mainly in cities & renovations, not suburban office parks
• Ongoing RevPAR gains still driving hotel growth but market is vulnerable to sudden reversals
Source: Author
Seattle
Major locations for data centers
Portland
SiliconValley
SouthernCalifornia
Las Vegas
Phoenix
Salt LakeCity
Denver
ColoradoSprings
Dallas
Houston
Kansas City
Omaha
Minneapolis
Des MoinesChicago
St. Louis
Atlanta
NorthernFlorida
NorthernVirginia
Boston
PhiladelphiaNorthernNew Jersey
Source: www.DataCenterKnowledge.com, from CBRE, ASHRAE
CT3%
3%
6%
2%
6%
11%
3%
5%
12%
5%
8%
‐1%
‐4%
12%
0.4%
7%
6%
2%
2%
9%
5%
3%
1%
2%
7%
0.1%
6%
3% 6%
1%
9%
‐1%
3%
3%
7%
‐0.4%
‐15%
12%
7%
HI12%
8%
VT1%
MD5%
DC1%
NH3%
Over ‐10% ‐5.1% to ‐10% ‐0.1% to ‐5% 0.1% to 5%
MA7%
State construction employment change (U.S.: 4.2%) 11/14 to 11/15: 44 states + DC up, 6 down
5.1% to 10% Over 10%
Shading based on unrounded numbers
0%
Source: BLS state and regional employment report
0.2%NJ7%
DE5%
RI‐7%
3%
Metro construction employment change 11/14 to 11/15: 190 metros up, 64 unchanged, 104 down
Over ‐10%
‐5.1% to ‐10%
‐0.1% to ‐5%
0.1% to 5%
5.1% to 10%
Over 10%
0%
Hardest positions to fill
34%
43%
55%
52%
60%
63%
65%
73%
79%
0% 25% 50% 75% 100%
Engineers
Estimators
Project mgrs/supervisors
ALL Salaried professionals
Electricians
Concrete workers
Sheet metal installers
Carpenters
ALL Hourly craft professionals
% of respondents who are having trouble filling
Source: AGC Member Survey, Sept. 2015
4%
23%
23%
48%
16%
23%
29%
56%
0% 10% 20% 30% 40% 50% 60%
Paying more overtime
Increasing contributions/benefits
Providing incentives/bonuses
Raising base pay
Increasing compensation
Hourly
Salaried
How contractors are coping with worker shortages
0% 10% 20% 30% 40% 50% 60%
Building information modeling (BIM) 7%Unions 9%
Offsite prefabrication 9%Lean construction 13%
Labor‐saving equipment, tools, machinery 19%Staffing company 33%Subcontractors 43%
Increasing use of:
Source: AGC Member Survey, Sept. 2015
Unemployed construction workers, Dec. 2000‐Dec. 2015(not seasonally adjusted)
0
300,000
600,000
900,000
1,200,000
1,500,000
1,800,000
2,100,000
2000 2002 2004 2006 2008 2010 2012 2014
Source: BLS
75
100
125
150
2011 2012 2013 2014 2015
75
100
125
150
2011 2012 2013 2014 201575
100
125
150
2011 2012 2013 2014 2015
75
100
125
150
175
2011 2012 2013 2014 2015
Flat glass
Producer price indexes for key inputs, 1/11‐11/15 (Jan. 2011=100)
Source: Author, based on BLS producer price index reports
Copper & brass mill shapes
Aluminum mill shapes
Latest 1‐mo. change: ‐1.7%, 12‐mo.: ‐1%
Latest 1‐mo. change: 0.0%, 12‐mo.: 6%
Latest 1‐mo. change: ‐3.0%, 12‐mo.: ‐16%
Latest 1‐mo. change: ‐1.4%, 12‐mo.: ‐13%
Gypsum products
75
100
125
150
2011 2012 2013 2014 2015
75
100
125
150
2011 2012 2013 2014 201575
100
125
150
2011 2012 2013 2014 2015
75
100
125
150
2011 2012 2013 2014 2015
Paving mixtures
Producer price indexes for key inputs, 1/11‐11/15 (Jan. 2011=100)
Source: Author, based on BLS producer price index reports
Concrete products
Steel mill products
Latest 1‐mo. change: ‐3.5%, 12‐mo.: ‐38%
Latest 1‐mo. change: ‐0.2%, 12‐mo.: ‐6%
Latest 1‐mo. change: 0.5%, 12‐mo.: 3%
Latest 1‐mo. change: ‐3.3%, 12‐mo.: ‐18%
Diesel fuel
Summary for 2014, 2015‐17 forecast
Source: 2014: Census, BLS; 2015‐17: Author’s ests.
2014actual
2015 forecast
2016‐17annual average
forecastTotal spending 10% 10‐12% 6‐10%
Private – residential 14% 10‐12% 5‐10%
– nonresidential 11% 11‐13% 5‐10%
Public 2% 5‐7% 2‐5%
Materials PPI ‐0.9% ‐3 to ‐5% 0‐2%
Employment cost index 1.8% 2‐2.5% 3‐4.5%
AGC economic resources(email simonsonk@agc.org)
• The Data DIGest: weekly 1‐page email (subscribe at http://store.agc.org)
• monthly press releases: spending; PPI; national, state, metro employment
• state and metro data, fact sheets:www.agc.org/learn/construction‐data
• webinars
www.agc.org/learn/construction-data
Vol. 16, No. 1 · Dec. 24, 2015-Jan. 6, 2016
Contractors show optimism about most segments in AGC poll; November spending dips
Contractors are optimistic, on balance, about the outlook for nonresidential and multifamily construction, based on the
1,580 responses to a survey that AGC released today. About 44% expect the available dollar volume of projects they compete
for in 2016 to be higher than in 2015, while 9% expect the volume to be lower, for a net positive reading of 34%. Among 13
market segments, the net was highest for retail, warehouse and lodging construction, 21%; followed by hospital and private
office, 19% each; multifamily, 14%; higher education, 13%; K-12 school and public building, 12% each. There was less
optimism about water/sewer, 8%; manufacturing, 7%; highway, 6%; other transportation, 3%; and power, 1%. Respondents
registered a 1% net negative reading regarding the outlook for federal construction. However, the survey was completed before
the recent enactment of federal tax bills with favorable terms for direct federal projects, highway and transit funds, and tax-
subsidized wind and solar power construction. Only 6% of respondents expect their firms to reduce headcount in 2016 vs. 71%
who expect an increase. About 70% say they are having a hard time filling key salaried or hourly craft positions and 69% say
it will be as hard or harder to do so in 2016. These results were broadly similar to those of AGC’s September 2015 workforce
survey and January 2015 outlook survey. Of 14 issues listed as answers to a question regarding “the biggest concerns to you
and your business,” 52% picked worker shortages; 45% chose worker quality; 40%, rising direct labor costs; 43%, increased
competition for projects; and 39%, growth in federal regulations. The 2016 survey was sponsored by software firm Sage and
included several questions about contractors’ use of information technology among other topics.
Construction spending in November totaled $1.122 trillion at a seasonally adjusted annual rate, 0.4% below the
upwardly revised October rate but 10% higher than a year before, the Census Bureau reported on Monday. Census said figures
“for January 2005 through October 2015 have been revised to correct a processing error in the tabulation of data on private
residential improvement spending,” which led to identical revisions in all totals that include it. The correction added more than
$30 billion to the seasonally adjusted annual rate totals for each month from May 2014 through September 2015. Spending
patterns diverged widely by segment and time period. Private residential spending increased for the eighth-straight month, by
0.3%, and 11% year-over-year (y/y). In contrast, private nonresidential spending slipped 0.7% for the month to a level lower
than in May, although it was still up 14% y/y. Public construction declined for the third month in a row, by 1.0%, but was up
6.0% y/y. New multifamily construction dropped 0.7% for the month but rose 25% y/y; new single-family construction gained
0.6% and 9.3%, respectively; and residential improvements rose 0.1% and 8.3%. Among private nonresidential segments, in
descending order of November size, manufacturing construction slumped 4.0% for the month to a seven-month low but was up
29% y/y; power fell 0.9% to an eight-month low but was up 5.6% y/y (comprising a 29% y/y jump in oil and gas pipelines and
field structures offsetting a 4.7% drop in electric power facilities); commercial (retail, warehouse and farm) slid 0.9% for the
month and 0.4% y/y; and office increased for the 9th consecutive month, by 1.7% and 23% y/y, to its highest level in seven years.
Of the two largest public segments, highway and street construction fell 1.3% for the month but was up 5.6% y/y, while
educational reached a four-year high, rising 5.0% from October and 15% y/y.
“Employers added 15.3 million square feet of office space in the fourth quarter, more than in any other quarter since the
third quarter of 2007, according to real-estate research service Reis Inc.,” the Wall Street Journal reported on Tuesday. Among
79 markets tracked by Reis, rents during 2015 rose most steeply in Seattle, 8.1%; San Francisco, 6.1%; and the San Jose area
(including Silicon Valley), 6.0%. “On the other end of the spectrum…low oil prices are taking a toll on the Houston market.
Companies there have dumped millions of square feet onto the sublease market while a rash of new construction is adding
supply. Houston’s vacancy rate rose to 15.6% from 14.5% a year earlier, according to Reis.”
United Van Lines reported on Friday, “For the third consecutive year, Oregon holds on to the No. 1 spot as ‘Top Moving
Destination,’ as Americans continue to pack up and head west and south. Those are the results of [the firm’s] 39th Annual
National Movers Study, which tracks customers’ state-to-state migration patterns over the past year.” State population
estimates issued by Census on December 22 “show a noticeable expansion of Sun Belt migration gains observed in the previous
year,” according to a Brookings Institution article posted on Tuesday. “The Sun Belt states gained well over half million migrants
in 2014-2015, coming close to matching the 600,000 Snow Belt to Sun Belt migration peak in 2004-2005. [Florida] gained
202,000 net migrants last year alone—leading all states in domestic migration gains for the first time since the years 2000 to
2005….Texas, Colorado, Arizona, South Carolina, North Carolina, Oregon and Georgia [each] received more migrants last year
than the year before….Among the eight largest out-migrant states, New York, Illinois, California, New Jersey, Pennsylvania,
Michigan, Ohio, and Connecticut all except [New York] showed greater migration losses last year than the year
before….International migration has picked up substantially in the last two years. The net gain of 1.15 million in 2014-2015
is the largest since 2001. Sixty percent of these immigrants accrue to Sun Belt states with California, Texas, and Florida
accounting for more than half.” Unlike immigration and natural increase (births less deaths), migration may offset increased
demand for construction and workers in some states with equal decreases elsewhere.
The Data DIGest is a weekly summary of economic news; items most relevant to construction are in italics. All rights reserved. Sign up at http://store.agc.org.
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