Send to a Friend View / Add Comments  
30 Year Building Outlook is Rosy

Vol. 4, No. 49 December 6-13, 2004
The Data DIGest
Ken Simonson, Cheif Economist, Associated General Contractors of America
Phone: 703-837-5313 Fax: 703-837-5406
simonsonk@agc.org

30-year building outlook is rosy; Nov. results mixed for materials prices, retail sales

Total construction needed between 2000 and 2030 to accommodate growth projections will amount to roughly 210 billion square feet, or 70% of existing built space, according to a paper by Arthur C. Nelson of Virginia Tech, "Toward a New Metropolis: The Opportunity to Rebuild America," released today by the Brookings Institution (www.brook.edu/metro/pubs/20041213_RebuildAmerica.pdf). More than 100 billion square feet will be homes, but commercial and industrial space will grow faster as a percent of existing built space. "Fast growing southern and western places-states like Nevada and Florida and metropolitan areas like Austin and Raleigh-will see the most dramatic growth", while the Northeast will lag. Although the Midwest will grow slowly overall, it contains four of the five largest expected producers of industrial space (after California): Ohio, Michigan, Illinois, and Indiana.

The producer price index (PPI) for finished goods climbed 0.5% in November, seasonally adjusted, the Bureau of Labor Statistics (BLS) reported Friday. That brought the 12-month gain to 5%. The acceleration is due to energy costs, which rose 20%, while finished goods other than energy rose just 2.2% year-over-year. Crude-oil prices have dropped steeply since November, which should bring down the PPI in December. The PPI for intermediate goods rose 9.8%, slightly faster than the PPI for construction materials and components, which climbed 9.6%. BLS noted, "The index for materials and components for construction showed no change in November, after edging down 0.1% in October. Price increases for fabricated structural metal products, concrete products, asphalt felts and coatings, steel mill products, plastic construction products, and nonferrous wire and cable offset falling prices for softwood lumber, plywood, building paper and board, wiring devices, mineral wool for structural insulation, and switchgear and switchboard equipment." The PPI for crude materials for construction also moderated, rising 0.2% in November (following a 0.3% rise in October) and 7% for the 12-month span. Among capital-equipment indexes, the PPI for construction machinery and equipment dropped 0.5% in November but was up 6.1% from November 2003.

Many attendees at last week's CenterBuild conference in Phoenix for shopping-center construction mentioned polyisocyunate insulation (polyiso) as the construction material causing the most supply problems currently. Polyiso is made from a petrochemical resin, MDI, for which production is reported at capacity. Contractors in some regions also mentioned continued difficulties lining up cement supplies. Steel and gypsum wallboard were reportedly still rising in price but were available. The Wall Street Journal reported on Wednesday, "spot prices in the U.S. are up for certain products, including steel plate, structural beams, steel bars and concrete reinforcing bar, or rebar, used for construction. Prices also have risen for steel scrap, a raw material for making steel", although prices have fallen recently for hot- and cold-rolled steel.

Delivery costs for construction materials and raw materials have risen because of higher fuel costs and tight supplies of ships, rail cars, trucks and truck drivers. However, fuel surcharges should drop from their peaks: the Energy Information Administration reported today that the average retail price of highway diesel fuel fell to $2.00 per gallon from $2.07 a week ago and an all-time high of $2.21 on October 25 and November 1. The price is still up 51 cents (34%) from a year ago.

Retail and food services sales in November rose just 0.1% from October, the Census Bureau reported today. For the first 11 months of 2004, sales exceeded the same period of 2003 by 7.8% (not adjusted for inflation). The leading categories were gas stations, +16%, and building material and garden equipment and supply dealers (boosted in recent months by hurricane-related sales), +15%. Department stores (excluding leased departments) brought up the rear, -0.3%, whereas other general merchandise stores (not shown separately) had a 13% increase. That category includes warehouse clubs and superstores, along with "dollar stores." Today's Journal reports, "the number of dollar stores in the U.S. has tripled over the past decade to 16,000 and industry observers say there's room for more. Dollar General, which owns 7,100 stores, plans to open 695 new stores by the end of this year after opening 587 outlets in 2003." At CenterBuild, much of the conversation was about construction of mixed-use (residential and commercial) structures and retooling of enclosed malls into "lifestyle" centers with outdoor areas and restaurant choices beyond food courts.

A survey of 455 contractors and 450 equipment distributors conducted in August and September and released last week by CIT Equipment Finance found 38% of the contractors said construction activity in their area would increase in 2005; 50% said it would remain the same. The percentage expecting to buy equipment was unchanged from the 2004 survey, but those buying expect to spend twice as much on new equipment and 20% more on used equipment. Non-builders expect to spend twice as much as builders.

        The Data DIGest is a weekly summary of economic news; items most relevant to construction are in italics. All rights reserved.


  Send to a Friend View / Add Comments  

  [ Back to Top ]

Copyright © 2004 Mike Holt Enterprises,Inc.
1-888-NEC-CODE (1-888-632-2633)