construction & materials outlook austin chapter – agc february 25, 2011 ken simonson, chief...

Construction & Materials Outlook

Austin Chapter – AGCFebruary 25, 2011

Ken Simonson, Chief EconomistAGC of America

[email protected]

Current economic influences on construction• GDP, personal income: gradual acceleration• Continuing problems for office, retail, warehouse• Loans for developers remain tight-to-unavailable• State/local spending: infrastructure not a priority• Federal spending helped but may decline soon• Price spikes for diesel, copper, possibly steel

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Federal funding sources and outlook• Stimulus: 61 programs, totaling $135 billion; at peak now• Base realignment: at peak now, due to end 9/30/11• Gulf Coast hurricane work: at peak, due to end 6/1/11• Highway, airways trust funds: on short-term extension• Water, wastewaster state revolving funds: flat or down

3

Construction-related stimulus funding (~$135 bil.)$49 billion

up to $35 billion

$30 billion

$21 billion

4

Construction spending: trend, latest level, 12-mo. changeSeasonally adjusted annual rate (SAAR), March 2006-December 2010

▬ Total Construction: $788 billion, -6%

▬ Public: $301 billion, 0%

▬ Private Nonres: $260 billion, -12%

▬ Private Residential: $226 billion, -7%

5Source: Census Bureau construction spending reports

Nonres totals (billion $, SAAR), share & 12-month change12/10 Total Share 12/09-12/10

Nonresidential $552 billion 100% - 6

Power 96 17 + 13

Highway and street 85 15 + 8 Educational 81 15 - 11 Transportation 39 7 + 1 Health care 39 7 - 6 Commercial 38 7 - 19 Manufacturing 34 6 - 25 Office 33 6 - 26 Sewage and waste disposal 25 5 + 4 Communication 18 3 - 9 Amusement and recreation 17 3 + 4 Other (water, public safety; lodging; conservation; religious): 9% of total

6Source: Census Bureau construction spending report

Construction spending: public works (billion $, SAAR)

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Latest 1-mo. change: -1.6%, 12-mo.: 8% Latest 1-mo. change: -2.1%, 12-mo.: 4%

Latest 1-mo. change: 0.8%, 12-mo.: 0% Latest 1-mo. change: -2.8%, 12-mo.: 0%

Source: Census Bureau construction spending reports

Construction spending: institutional (private + state/local)

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Latest 1-mo. change: -4.1%, 12-mo.: -7% Latest 1-mo. change: 0.3%, 12-mo.: -4%

Latest 1-mo. change: -2.3%, 12-mo.: -17% Latest 1-mo. change: -6.4%, 12-mo.: -23%


Construction spending: industrial, heavy (billion $, SAAR)

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Latest 1-mo. change: 2.1%, 12-mo.: 13% Latest 1-mo. change: -1.5%, 12-mo.: -25%

Latest 1-mo. change: 1.6%, 12-mo.: -9% Latest 1-mo. change: -4.9%, 12-mo.: 4%


Construction spending: developer-financed (billion $, SAAR)

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Latest 1-mo. change: 0.1%, 12-mo.: -18% Latest 1-mo. change: 0.2%, 12-mo.: -27%

Latest 1-mo. change: 4.6%, 12-mo.: -29% Latest 1-mo. change: -5.2%, 12-mo.: -49%


Economic impact of nonresidential construction• Jobs: 28,500 per $1 billion

• 1/3 direct, onsite construction• 1/6 indirect (quarries, mfg., services)• 1/2 “induced” by spending from higher earnings of

construction, indirect workers and owners• GDP: $3.4 billion• Personal earnings: $1.1 billion

11Source: Prof. Stephen Fuller, George Mason University

▬ Nonresidential1-mo: -1.1%, 12-mo: -1.9%

▬ Residential1-mo: 0.2%, 12-mo: -4.4%

Construction and total private employment, 2008-Jan. 2011

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Latest 1-mo. change: -0.6%, 12-mo.: -2.3% Latest 1-mo. change: 0.0%, 12-mo.: 1.2%

Latest 1-mo. change: -0.8%, 12-mo.: 1.6%


13Source: BLS state and regional employment report

-2%

-4%

-6%

-12%

-5%

0.5%

-19%

-1%

-5%

-2%

-1%

-2%

-2%

5%

9%

6%

-5%

1%

-9%

2%

-6%

-1% -7%

-10%

1%

-4% -4%

-5%

-1%

-0.1%

-4%

-6%

-8%

-6%

1%

-9%

2%

-2%

-3%

VT0%

CT-7%

RI-7%

DE4%

NJ-4%

MD2%

DC3%

NH4%

-10 to -19% -3 to -9% -0.1 to -2% 0 to 9%

MA1%

State Construction Employment Change (U.S.: -3%) 12/09 to 12/10 (seasonally adjusted)

Source: BLS 14

Construction Employment Change from Year AgoNot seasonally adjusted (NSA)

Source: BLS 15

Austin-Round Rock-San Marcos -4%162 out of 337

U.S. -3%

Texas 6%2 out of 51

Change in construction employment, 12/09-12/10

Metro area or division12-mo. empl. change (NSA)

Rank(out of 337)

Statewide 6% -Austin-Round Rock-San Marcos* -4% 162Beaumont-Port Arthur* 6% 12College Station-Bryan* 6% 12Corpus Christi* 5% 21Dallas-Plano-Irving, Div.* 2% 48El Paso* 5% 21Fort Worth-Arlington, Div.* -1% 107Houston-Sugar Land-Baytown -1% 107Longview* 5% 21McAllen-Edinburg-Mission* 0% 68Midland* 4% 31Odessa* 5% 21San Antonio-New Braunfels -0.2% 106

*Mining and logging included with construction

Source: AGC rankings, calculated from BLS state and area employment reports 16

Construction employment, wages, costs and output prices

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not seasonally adjusted, █ construction █ total 12-mo. % change, 2008-Jan. 2011 (1/10-1/11: 4.9%)

4-quarter % change, 2008-4Q 2010 (4Q09-4Q10: 0.9%) 12-mo. % change, January 2010-Januray 2011

Source: BLS employment, employment cost index, producer price index (PPI)

Unemployment rates, Jan. 2008-Jan. 2011 Producer price index for construction inputs

Employment cost index for construction PPI for construction inputs, finished buildings

CPI vs. PPI for construction inputs, new offices

18Source: Author, based on BLS producer and consumer price index reports

Producer price indexes, 1/08-1/11

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Latest 1-mo. change: 3.2%, 12-mo.: 17.7% Latest 1-mo. change: 2.0%, 12-mo.: 11.5%


Source: BLS producer price index reports

Producer price indexes, 1/08-1/11

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Latest 1-mo. change: -3.3%, 12-mo.: 0.5% Latest 1-mo. change: 2.0%, 12-mo.: 7.4%

Source: BLS producer price index reports

Outlook for materials• Industry depends on specific materials that:

• are in demand worldwide• have erratic supply growth• are heavy, bulky or hard to transport

• Construction requires physical delivery• Thus, industry is subject to price spurts, transport

bottlenecks, fuel price swings• Expect periods of 6 to 8% PPI increases

21Source: Author

Latest 1-mo. change: -5.3%, 12-mo.: -28%

Single- vs. multi-family, 2008-11, seasonally adjusted annual rate (SAAR)Single-family & improvements spending

▬ SF (1-mo 0%, 12-mo -4%), ▬ Imp (1-mo -8%, 12-mo -6%)

Multi-family permits & starts

▬ Permits (1-mo -24%, 12-mo 18%)▬ Starts (1-mo 78%, 12-mo 81%)

Single-family permits & starts

▬ Permits (1-mo -5%, 12-mo -17%)▬ Starts (1-mo -1%, 12-mo -19%)

Source: Census Bureau construction spending, housing starts reports 22

Housing outlook• SF: starts, permits should rise gradually in ’11• MF: Upturn has begun, should accelerate in ’11

- Rental demand should rise as more people get jobs or move to military base realignment sites

- Condo market continues to have large overhang- Banks remain unwilling to lend to developers

23Source: Author

AGC/Navigant Consulting Construction Outlook Survey

24Source: AGC/Navigant Consulting, Inc Survey, 1/25/2011

Did you add or lay off employees in 2010? Do you plan to add or lay off workers in 2011?



Have you adjusted your bids in 2010 so that profits are:

Do you plan to adjust your bids in 2011 so that profits are:

Compared to 2010, do you expect the available dollar volume of projects you compete for in 2011 to be:

Power Hospital/ higher

education

Water/ sewer

Public building

Manu-facturing

Retail ware-house

lodging

K-12 school

Highway Other trans-

portation

Private office

Higher

Same

Lower




When do you expect the construction market to again grow?

Summary for 2011• Nonres spending: 0 to +5% (less stimulus; weak state-

local; more warehouse, hotel, hospitals, higher ed)

• Res: +5 to +10% (SF up a bit, MF accelerating)

• Total construction spending: +3 to +7%

• Materials costs: +3% to +8%

• Labor costs: +2.5% or less

28Source: Author

AGC economic resources (email [email protected])• The Data DIGest: weekly 1-page email

(subscribe at: www.agc.org/datadigest)

• PPI tables: emailed monthly

• State and metro data, fact sheets

• Stimulus info: www.agc.org/stimulus

• Webinars (next: 3/3 with AIA, Reed)

• Feedback on stimulus, credit, costs

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construction & materials outlook austin chapter – agc february 25, 2011 ken simonson, chief...

Documents

construction gdp

total construction

onsite construction

latest level

priority federal spending

george mason university

private nonres

outlook stimulus