Construction PPIs, starts rose in May but fell from year ago; states, metros shed jobs

The producer price index (PPI) for finished goods climbed 0.5%, not seasonally adjusted (0.2%, seasonally adjusted), in April but fell 5% over the 12 months since May 2008, the Bureau of Labor Statistics (BLS) reported on Tuesday. That was the largest one-year drop in 60 years. The PPI for inputs to construction rose for the month and decreased from 12 months ago for every type of construction: all construction industries, 0.6% and - 5.3%; highway and nearly street, 2.1% and -11%; other heavy, 0.8% and -10%; nonresidential buildings, 0.6% and -5.9%; multi-unit residential, 0.2% and -3.8%; and single-unit, 0.1% and -1.0%. The variations reflect disparities in the weights for PPIs for different materials. The PPI for diesel fuel jumped 4.4% for the month but was down -58% over 12 months; asphalt paving mixtures and blocks, 3.5% and 12%; concrete products, -0.1% and 2.1%; steel mill products, -2.7% and -24%; copper and brass mill shapes, 0.8% and -25%; plastic construction products, -0.1% and 1.7%; gypsum products, -2.4% and 4.2%; lumber and plywood, -0.9% and -14%. PPIs for new buildings and subcontractor types, the only indexes that attempt to include overhead, profit and labor costs, were mixed for the month but up over 12 months. The PPI for new industrial buildings was down -0.3% for the month but up 6.9% since May 2008; warehouses, -0.4% and 5.7%; schools, 0 and 11.5%; and offices, 0.3% and 6.4%. The PPI for nonresidential building work by concrete contractors rose 0.4% and 4.8%; roofing, 0 and 11%; electrical, -0.1% and 3.1%; and plumbing, 0.3% and 8.7%. The consumer price index (CPI) for all urban consumers increased 0.3%, not seasonally adjusted (0.1%, seasonally adjusted) in May but fell 1.3% over 12 months, BLS reported on Wednesday. The CPI for urban wage earners and clerical workers, which is used to adjust many wage contracts in construction, fell -1.9% over the year. New construction starts jumped 7% in value in May at a seasonally adjusted annual rate, McGraw-Hill Construction reported on Tuesday, based on data it collected. However, year-to-date (YTD) starts in the first five months of 2009 combined were 38% below the same period of 2008. "May's strengthening was led by a substantial increase for public works, which featured a major pipeline project as well as gains for highways, bridges, sewers and water supply systems. Meanwhile, housing stayed flat and nonresidential building resumed its downward trend after the brief upturn reported in April. Robert Murray, vice president of economic affairs [commented,] 'Single-family housing now seems to be leveling off after its lengthy correction, and public works is picking up speed, with more to come given the lift that's just beginning to emerge from the federal stimulus funding. This will be offset, however, by further weakness for nonresidential building, involving its commercial, manufacturing and institutional segments.' Nonbuilding construction in May surged 28% to $149.1 billion (annual rate). The "miscellaneous" public works category (including such project types as pipelines and rail work) soared 91%, with the push coming from $2.5 billion related to segments of the Keystone oil pipeline project covering the states of South Dakota, Nebraska, Kansas, Missouri, and Illinois. If this massive project is excluded from the May statistics, then the 28% increase for nonbuilding construction would be reduced to a 2% gain, and the 7% increase for total construction would become a 1% decline." Residential building starts were unchanged in May and off -49% YTD; nonresidential building, -4% and -43%; and nonbuilding, 28% and -14%. Seasonally adjusted nonfarm payroll employment decreased in May in 39 states and increased in 11 states and the District of Columbia, BLS reported today. Compared to May 2008, employment decreased everywhere except in North Dakota (+1.1%) and Alaska (no change). Seasonally adjusted construction employment rose in May in 18 states, fell in 31 plus D.C., and was unchanged in South Carolina. Compared to a year earlier, construction employment dropped in 48 states plus D.C., and climbed only in North Dakota, 4%, and Louisiana, 3%. The biggest 12-month percentage declines were in Arizona, -28%; Kentucky and Connecticut, -21% each; and Nevada and Tennessee, -20% each. (To prevent disclosure of data for industries with small employment totals, BLS presents construction combined with mining and logging in Tennessee, five other states and D.C.) BLS also posted data on metro-area employment, not seasonally adjusted. Of the 311 metro areas (including metropolitan divisions of large metros) with construction (or combined) data, construction employment rose in only nine, fell in 300 and was unchanged in two. State personal income continued to decline in the first quarter of 2009, falling 0.5% and encompassing 37 states, according to estimates released on Thursday by the Bureau of Economic Analysis. In the fourth quarter of 2008, personal income fell 0.4%. "Finance, manufacturing and construction were the major contributors to the national decline and in fact can more than account for the entire loss....In many states, one or two industries accounted for the bulk of the decline in earnings: ...construction in Arizona and [construction] and food services in Nevada." Industrial production (IP) in manufacturing decreased 1.0% in May, seasonally adjusted, after falling 0.6% (revised from an initial estimate of -0.3%) in April, the Federal Reserve reported on Tuesday. Compared to May 2008, manufacturing output was down -15%. IP of construction supplies fell 1.0% in May, -1.5% in April and -21.5% over 12 months. Capacity utilization in manufacturing fell to 65.0% from 65.6% in April and a long-term average of 79.6%. The combination of falling current output and low capacity utilization is very negative for demand for factory construction.