market demand management
TRANSCRIPT
1-1
MARKET INTELLIGENCE
Quarterly Economic Outlook May 2015
1-2
Market Metrics
1-3
Key Performance Measures
Past Looking Indices
• United States Census Bureau
New Residential Construction
Housing Units Completed
Housing Units Started
Total Construction Spending
Commercial Construction Spending
Residential Construction Spending
Manufacturing Construction Spending
Forward Looking Indices
• American Institute of Architects
Architecture Billings Index
New Projects Inquiry
• McGraw Hill Construction
Dodge Momentum Index
Building Planning Index
• National Association of Home Builders
Housing Market Index
Remodeling Market Index
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Housing Market Snapshot
Housing Starts (March 2015) Total: 926↑ Single: 618,000↑ Multi: 308,000↓
Home Sales* (March 2015) New: 481,000↓ Existing: 5.19 million↑
Median Home Prices (March 2015) New: $277,400↓ Existing: $213,500↑
*Seasonally Adjusted Annual Rate; Arrows indicate direction from previous month for starts and sales and year for prices.
NAHB/Wells Fargo Housing Market Index – The index, which measures builder confidence in the market for newly built single-family homes, rose four points to 56 in April from a March reading of 52. Any number over 50 indicates that more builders view sales conditions as good than poor. NAHB Chief Economist David Crowe’s analysis: “As the spring home buying season gets into full bloom, home builders are confident that current low interest rates and continued job growth will draw consumers to the market. At the same time, builders are being careful not to add inventory beyond expected demand, especially as they struggle with increasing costs for lots and labor. Looking beyond the spring, pent-up demand, a growing economy and attractive mortgage rates will keep the housing market moving forward throughout 2015 and into next year.”
Market Overview The Dodge Momentum Index
(Year 2000=100)
Apr-15 Mar-15 % Change
Dodge Momentum Index 122.6 121.6 0.8%
Commercial Building 134.0 133.3 0.5%
Institutional Building 108.5 107.2 1.2%
Source: Dodge Data & Analytics
Quarter Growth 2013-Q3 2013-Q4 2014-Q1 2014-Q2 2014-Q3 2014-Q4 2015-Q1 2015-Q2 Real GDP 4.52% 3.50% -2.11% 4.59% 4.97% 2.22% -0.75%
Architecture Billings Index Avg 53.6 50.0 50.0 51.9 54.7 52.3 50.7
U.S. Housing Starts YTD 20.2% 18.5% -1.0% 6.3% 9.6% 8.5% 3.7% 5.5%
Residential Construction Spending YTD 21.0% 19.3% 12.8% 9.3% 5.8% 3.5% -0.8%
Commercial Construction Spending YTD 5.7% 7.7% 6.8% 8.9% 11.3% 12.3% 14.2%
Dodge Momentum Index Avg 105.2 108.3 109.7 115.4 113.3 123.9 122.2 122.6
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The Architecture Billings Index is the 3-month average of the
billings index reported by the American Institute of Architects.
The YTD calculations are year on year growth for the
designated quarter.
Regional Quarterly Synopsis
Quarter Growth 2013-Q3 2013-Q4 2014-Q1 2014-Q2 2014-Q3 2014-Q4 2015-Q1 2015-Q2
Midwest Architecture Billings Index Avg 51.5 50.1 46.9 51.5 53.4 51.7 50.7
Northeast Architecture Billings Index Avg 53.1 46.7 46.2 47.2 54.9 46.4 53.9
South Architecture Billings Index Avg 53.4 52.5 53.0 56.5 55.2 57.7 46.6
West Architecture Billings Index Avg 55.5 53.1 50.8 48.2 53.4 53.9 48.8
Midwest Housing Starts YTD 20.7% 17.1% -4.6% 19.3% 14.0% 8.6% 8.3% 1.0%
Northeast Housing Starts YTD 21.5% 21.6% 20.8% 16.3% 16.2% 13.2% -24.1% -0.3%
South Housing Starts YTD 18.7% 16.6% -4.2% 2.1% 7.4% 7.1% 5.5% 4.7%
West Housing Starts YTD 23.2% 22.7% -0.6% 3.9% 8.7% 9.4% 11.0% 12.4%
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National & Regional Rates of Change
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
2013-Q1 2013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q2 2014-Q3 2014-Q4 2015-Q1 2015-Q2
Yo
Y C
han
ge
Quarterly YTD Housing Construction Trends
Residential Construction Spending YTD U.S. Housing Starts YTD Midwest Housing Starts YTD
Northeast Housing Starts YTD South Housing Starts YTD West Housing Starts YTD
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American Institute of Architects
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About the Architecture Billings Index
The Architecture Billings Index (ABI) is a diffusion index derived from the monthly Work-on-the-Boards survey, conducted by the AIA Economics & Market Research Group. The ABI serves as a leading economic indicator that leads nonresidential construction activity by approximately 11 months. The indexes are developed from the monthly Work-on-the-Boards survey, where survey panelists are asked to report whether billings during the previous month significantly increased, remained about the same, or significantly decreased from the prior month. According to the proportion of respondents choosing each option, a score is generated, which represents an index value for each month. If an equal share of firms report an increase as report a decrease, the score for that month will be 50. A score above 50 indicates that firms in aggregate are reporting an increase in activity that month compared to the previous month, while a score below 50 indicates that firms are reporting a decrease in activity.
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Architecture Billings Index
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Best Relationships Between National or Sector
ABI and Relevant Construction
Spending Measure Range from 10 to 12 Months
ABI lead over
construction spending
Correlation
Total construction
spending on
nonresidential buildings
10 months 0.846
11 months 0.851
12 months 0.849
Spending on
commercial/industrial
buildings
10 months 0.812
11 months 0.823
12 months 0.818
Spending on Institutional
buildings
6 months 0.716
7 months 0.723
8 months 0.719
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Note: ABI presented as three-month moving average;
construction spending presented on three months moving
averages and year-over-year percent change
Cyclical Patterns Match Best When ABI Is Shifted Forward
11 Months
1-12
Note: ABI presented as three-month moving average;
construction spending presented on three months moving
averages and year-over-year percent change
Commercial/Industrial ABI Lead Over
Commercial/Industrial
Construction Spending Is 11 Months
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Note: ABI presented as three-month moving average;
construction spending presented on three months moving
averages and year-over-year percent change
7 Months Is Best Lead for Institutional
ABI Over Institutional Construction
Spending
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More Positive Business Conditions Resume in March
Graphs represent data from January 2009 – March 2015.
National
0
10
20
30
40
50
60
2009 2010 2011 2012 2013 2014 2015
Architecture Billings Index (50 = No Change, Above 50 = Growth, Below 50 = Decline)
Architecture Billings Index
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Severe Weather Continues to Slow Project Activity in the Northeast
Graphs represent data from January 2010 – March 2015 across the
four regions. 3-month moving average.
Regional
0
10
20
30
40
50
60
70
2010 2011 2012 2013 2014 2015
Architecture Billings Index (50 = No Change, Above 50 = Growth, Below 50 = Decline)
Midwest South Northeast West
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Institutional Activity Remains Encouraging
Graph represents data from January 2010 – March 2015 across the four sectors. 3-month moving average.
Sector
0
10
20
30
40
50
60
70
2010 2011 2012 2013 2014 2015
Architecture Billings Index (50 = No Change, Above 50 = Growth, Below 50 = Decline)
Commercial/Industrial Multi-Family Residential Mixed Practice Institutional
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McGraw-Hill
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What is the Dodge Momentum Index?
The Dodge Momentum Index is a unique 12-month leading indicator of construction spending for nonresidential building. The index is designed to specifically focus on patterns within the commercial and institutional segments of the industry and uses first issued planning Dodge Report information on construction projects as a leading indicator of the future direction of construction spending. This unique approach differentiates the Dodge Momentum Index from all other indices in the market today. Additional details are available for the overall commercial and institutional sectors, and the sub-sectors of office buildings, retail and warehouse buildings, and education buildings.
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Source: Dodge Data & Analytics
* Dodge Momentum Index includes nonresidential buildings,
except manufacturing.
Dodge Momentum Index*
50
75
100
125
150
175
200
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Dodge Momentum Index (Year 2000=100)
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Early expansion: The period of acceleration in the pace of economic activity. This is the phase in the cycle when the economy is recovering from the last downturn and expanding into a period of new growth.
Peak growth: The point where the rate of growth reaches its high point for that cycle.
Late expansion: After the economy reaches a point of peak growth, growth begins to slow.
Market peak: The point when actual economic output (not the rate of growth) is at its peak for that cycle.
Early contraction: The phase immediately after the market peak when slow growth transitions to a period of accelerating decline.
Peak decline: The point of a business cycle where the rate of decline is at its steepest.
Late contraction: The period when the pace of decline begins to slow.
Market trough: The point when economic output is at its lowest for that cycle.
National Spending on
Nonresidential Buildings
Is Extremely Cyclical
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Note: Nonresidential construction categories covered include those referenced in Appendix A.
Source: U.S. Department of Commerce, Construction Spending Put-in-Place, from 8/1/2013 release.
National spending ($billion) and annual
percent change in spending on
nonresidential buildings
1-22
The Current Business Cycle
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Residential & Commercial Forecasted Growth
Forecast
-
200
400
600
800
1,000
1,200
1,400
1,600
0
500
1000
1500
2000
2500
3000
3500
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Tho
usa
nd
s o
f U
nit
s
Mill
ion
s o
f Sq
r Ft
Year
Com & Ind Con Starts Sqr Ft Resi Con Starts Sqr Ft Resi Con Unit Starts
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Residential & Commercial Construction Starts
Forecast
0
50
100
150
200
250
300
350
400
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Bill
ion
s o
f D
olla
rs
Year
Com & Ind Con Starts Val Residential Con Starts Val
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The Wall Street Journal
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New-Home Market Starting to Simmer
• “New-home sales climbed 6.8% from March to a seasonally adjusted annual rate of 517,000, the Commerce Department said Tuesday.
• So far this year, builders are averaging just more than 1 million starts, not much different from 2014.
• Woodside Homes, a closely held builder operating in five western and southern states, sold 453 homes in the first quarter, up 30% from a year earlier.
• So far this year, monthly sales of new homes have averaged 515,000, a pace that if continued would mark the best since the first half of 2008. During the past year, new-home purchases are up 26.1%. The market in April had 4.8 months of supply of new homes, reflecting how long it would take to exhaust existing inventory at the April sales pace.
• New-home sales reflect about one-tenth of all home purchases. The April figure has a margin for error of plus or minus 15.8%.”
A2 | Wednesday, May 27, 2015: Jeffrey Sparshott
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Appendix
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The NAHB-Wells Fargo Housing Market Index
• The Housing Market Index (HMI) is based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. The survey asks respondents to rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes.
• The HMI is a weighted average of separate diffusion indices for these three key single-family series. The first two series are rated on a scale of Good, Fair and Poor and the last is rated on a scale of High/Very High, Average, and Low/Very Low. A diffusion index is calculated for each series by applying the formula “(Good-Poor+100)/2” to the present and future sales series and “(High/Very High – Low/Very Low + 100)/2” to the traffic series. Each resulting index is then seasonally adjusted and weighted to produce the HMI.
• Based on this calculation, the HMI can range between 0 and 100.
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National Association of Home Builders