The producer price index (PPI) for finished goods rose 0.4% in November, not seasonally adjusted (0.8%, seasonally adjusted), and 3.5% from November 2009, the Bureau of Labor Statistics (BLS) reported on Tuesday. The PPI for inputs to construction—a weighted average of the cost of materials used in all types of construction, plus items consumed by contractors such as diesel fuel—climbed 0.5% and 4.6%, respectively. That added to the cost pinch on contractors, who have generally been unable to pass along cost increases. The PPIs for finished buildings and for nonresidential subcontractors, which take into account overhead and profit, stayed flat. The index for new office construction rose 0.3% for the month but fell 0.1% over 12 months. The PPIs for new industrial and school construction were flat for the month and up 0.2% from a year ago. The index for new warehouses was flat for the month and up 0.5% over 12 months. The PPI for roofing subcontractors rose 0.1% in November but fell 2.1% year-over-year; concrete subcontractors, 0.1% and +0.5%; electrical, -0.1% and 0.8%; and plumbing, -0.2% and 1.4%. Major cost drivers included diesel fuel, 4.8% and 18.5%; copper and brass mill shapes, 5.6% and 16%; and aluminum mill shapes, 3.5% and 14%. The index for steel mill products fell 1.2% for the month but jumped 12% since November 2009. More moderate changes were reported for lumber and plywood, 0.1% and 5.8%; asphalt paving mixtures and blocks, -0.3% and 4.6%; plastic construction products, 0.7% and 3.3%; gypsum products, -0.2% and 0.8%; and concrete products, 0 and -0.3%.
Further price increases for several materials important to construction have occurred or been announced since the PPI data was collected in mid-November. The futures price of copper on the Comex division of the New York Mercantile Exchange reached $4.20 on Tuesday, 35% above the year-ago level and above the previous peak in 2008. The price of on-highway diesel fuel averaged $3.23 on Monday, a two-year high and 18% above the year-ago mark, the Energy Information Administration reported. Nucor Steel announced on December 8, that “our transaction pricing for concrete reinforcing bars, merchant bars and structural products will increase by $45 per ton” effective January 1.
The consumer price index (CPI) for all urban consumers (CPI-U) inched up 0.1%, seasonally adjusted, in November and 1.1% over the past 12 months, BLS reported today. The CPI for urban wage earners and clerical workers (CPI-W), used to adjust some union contracts in construction and other industries, rose 1.3% over 12 months.
Industrial production (IP) in manufacturing rose 0.3% in November, seasonally adjusted, matching the rise in October, the Federal Reserve reported today. IP of construction supplies leaped 0.9%, following a 0.1% gain. Capacity utilization in manufacturing climbed to 72.8% of capacity from 72.6%, but still far below the 1972-2009 average of 79.2%. Together, rising IP in manufacturing and above-average capacity utilization can signal demand for factory construction.
Total compensation in construction for full-time workers averaged $31.90 in September, nearly identical to the $31.93 average for all private-sector full-time workers. There was little difference in the split between wages ($21.89 in construction, $22.14 overall) or total benefit costs ($10.01 vs. $9.79). But construction firms paid much more in legally required benefits, such as worker’s compensation ($3.54 vs. $2.53), and retirement and saving, ($1.77 vs. $1.24). Contractors paid slightly more for supplemental pay ($1.09 vs. $0.96) and less for insurance ($2.44 vs. $2.72) and paid leave ($1.18 vs. $2.34).
“Office buildings in many city downtowns have stopped losing tenants or are filling up again even as the office space in the surrounding suburbs continues to empty,” the Wall Street Journal reported on Monday. “The national office vacancy rate in downtowns was 14.9% at the end of the third quarter, the same level as in early 2005—while the suburban vacancy rate hit 29.2%, 2.3 percentage points higher than in 2005, according to data firm Reis Inc. In the first three quarters of this year, businesses in the suburbs vacated a net 16 million square feet of occupied office space…while downtowns have stabilized, losing just 119,000 square feet….Just this year, the country’s biggest office market, Manhattan, had gained 1.8 million square feet of occupied space as of September. Meanwhile, New York’s suburbs, from northern New Jersey to Westchester County, Long Island and Connecticut’s Fairfield County, continued to lose occupancy—to the tune of a combined 1.4 million square feet, Reis data shows.” The article and an accompanying graphic also cite Washington, Charlotte, Houston, Las Vegas, Miami, Pittsburgh and Phoenix as having downtown gains and suburban losses since 2009.
“Utah, a state not generally known for issuing large amounts of debt, sold $200 million in Build America Bonds to pay for a trolley system to the Salt Lake City International Airport and an extension of a commuter rail line,” Stateline.org reported on December 6. “The school district in Lexington, Kentucky, issued $41 million in bonds to renovate five public schools….Financially troubled California has sold about $30 billion in Build America Bonds, more than any other state. California used the program to help rebuild the Bay Bridge linking San Francisco and the East Bay, renovate and erect new buildings at University of California medical centers, and construct prisons and schools.” The bonds are taxable but receive a 35% federal subsidy, making them cheaper for issuers than tax-exempt municipal bonds. The subsidy is scheduled to expire for bonds issued after December 31; renewal is not part of the tax bill the Senate will vote on today.
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