Construction Spending, Labor & Materials Outlook. September 25, 2015 Ken Simonson Chief Economist, AGC of America

Transcription

1 Construction Spending, Labor & Materials Outlook September 25, 2015 Ken Simonson Chief Economist, AGC of America

2 Construction spending & employment, Total spending, March 2006 (peak)-july 2015 billion $, seasonally adjusted annual rate (SAAR) $1.21 trillion $1,250 $1,000 $750 $500 $ $1.08 trillion (-11%) Total employment, April 06 (peak)-aug. 15 thousands, seasonally adjusted 7, million 6,000 4,500 3,000 1, mil. (-17%) Spending change from March 2006 Employment change from April % 50% 25% 25% 0% 0% -25% -25% -50% -50% -75% -75% Total as of 7/15: -11% Residential: -43% Private nonres: 43% Public: 18% Total: -17% Residential: -29% Nonresidential: -8% Source: BLS, Census Bureau construction spending reports

3 Construction is growing, but unevenly 3 trends helping many sectors and regions: Shale gale mainly downstream after oil price plunge Panama Canal expansion Residential revival, especially multifamily 3 trends holding down construction growth: Government spends less on schools, infrastructure Consumers switch from stores to online buying Employers shrink office space per employee Source: Author

4 Shale plays in lower-48 states Current play oldest stacked play F Current play intermediate depth/ age stacked play Current play shallowest/ youngest stacked play Prospective play Basin Source: U.S. Energy Information Administration, based on data from various published studies

5 Shale s direct and indirect impacts on construction Onsite: Each well requires access road, site prep, pad, storage pond, support structures, pipes Nearby: Products, water require trucking, rail, pipeline, processing Local spending by drilling firms, workers, royalty holders Upstream: orders for fracking sand, rigs, compressors, pumps, pipe, tanks, trucks, railcars, processing facilities Downstream: Petrochemical, power, steel plants; LNG export terminals, fueling stations; NG-powered vehicles Losers: coal; maybe wind, solar, nuclear & their suppliers Source: Author

6 U.S. ports affected by Panama Canal expansion Seattle & Tacoma Columbia River at Mouth, OR & WA NY-NJ Oakland Baltimore Los Angeles/ Long Beach San Diego Houston Mobile New Orleans Norfolk Charleston Savannah Jacksonville Miami Source: U.S. Army Corps of Engineers

7 Panama Canal expansion s impacts on construction Ports: investing in dredging, piers, cranes, land access Nearby: Storage, warehouse, trucking, rail facilities Bridge, tunnel, highway improvements Inland: possible changes in distribution, manufacturing Source: Author

8 12 month % change Billion $ Residential spending: MF, SF gains offset weak improvements $400 $300 Private residential spending, Jan July 2015 (billion $, SAAR) Multifamily (MF) 0 $ Single family (SF) Improvements 60% 12-month % change, Jan July % 20% 0% -20% Multifamily: 21% Single family: 16% Total: 16% Improvements: 13% Source: Census Bureau construction spending reports

9 2015 residential spending forecast: 1-14% SF: 10% to +16%; rising for now but tight credit, fear of lock-in, demographic shifts may limit increases MF: +10 to +20%; upturn should last through 2015 Vacancy rates near multi-year lows in most cities Preference for urban living adds to demand Condos have been slower to revive than rentals Government-subsidized market remains weak Improvements: -10 to +10%; reported decline is not credible; should track SF sales Source: Author

10 Population change by state, July 2013-July 2014 (U.S.: 0.75%) decrease % % % 1.5%+ 1.3% 1.1% 1.7% 1.0% 1.3% 1.5% 1.4% 0.9% 0.2% 1.6% -0.1% 2.2% 0.9% 0.7% 0.3% 0.6% 0.6% 0.3% 0.3% 0.1% 0.5% 0.05% 0.2% -0.1% 0.4% -0.2% 0.3% 0.7% 0.3% 1.0% 0.8% 0.3% 1.3% 1.0% 0.1% 0.3% 0.1% CT -0.1% DE 1.1% MD 0.6% NH 0.3% VT -0.05% MA 0.5% RI 0.2% NJ 0.3% DC 1.5% -0.1% HI 0.8% 1.7% 0.4% 1.5% Source: U.S. Census Bureau News

11 Nonresidential segments: 2014 total & 2015 forecast 2014 total Jan.-July YTD 2015 vs forecast Nonresidential $618 billion 9 % 5-12% Power (incl. oil & gas structures, pipelines) to 0 Highway and street to 3 Educational to 5 Commercial (retail, warehouse, farm) to 10 Manufacturing to 50 Office to 20 Transportation to 10 Health care to 6 Sewage and waste disposal to 20 Amusement & recreation to 35 Lodging to 30 Other (communication; water; public safety; 5 conservation; religious): 8% of total 0 to 10 Source: Census Bureau construction spending report; Author s forecast

12 Construction spending: industrial, heavy (billion $, SAAR) Power (88% private) $100 $80 $60 $40 Total Electric Oil & Gas Latest 12-mo. change: -12% (oil & gas 15%; electric -21%) Manufacturing (99% private) $100 $80 $60 $40 Total Chemical Other Latest 12-mo. change: 73% (other 34%; chemical 130%) Transportation facilities (70% public) $50 $40 $30 $10 Public & private transportation facilities $50 $40 $30 Public $10 Private Latest 12-mo. change: 8% Latest 12-mo. change: private 18%; public 4% Source: Census Bureau construction spending reports

13 Construction spending: public works (billion $, SAAR) $90 Highways (99% public) $30 Sewage/waste (99% public) $60 $30 $10 Latest 12-mo. change: 10% Latest 12-mo. change: 11% Amusement & recreation (48% public) $30 $10 $30 $10 Water supply (96% public) Latest 12-mo. change: 34% Latest 12-mo. change: 4% Source: Census Bureau construction spending reports

14 Construction spending: institutional (private + state/local) Total education (79% public) $100 $80 $60 $40 Latest 12-mo. change: 4% Total healthcare (78% private) $50 $40 $30 $10 Latest 12-mo. change: 6% Education (state & local K-12, higher; private) $100 $80 S/L prek-12 $60 $40 S/L higher ed Private Latest: state/local prek %, higher 15%; private 8% Hospitals (private, state & local) $50 $40 $30 Private $10 S/L Latest 12-mo. change: private 23%; state & local-11% Source: Census Bureau construction spending reports

15 Construction spending: developer-financed (billion $, SAAR) Retail (private) $80 $60 $40 Latest 12-mo. change: 6% Office (85% private) $80 Total $60 Private $40 Public Latest 12-mo. change: 26% (private 29%; public 10%) Warehouse (private) $40 $40 Lodging (private) $30 $30 $10 $10 Latest 12-mo. change: 11% Latest 12-mo. change: 41% Source: Census Bureau construction spending reports

16 Major locations for data centers Seattle Portland Minneapolis Boston Silicon Valley Southern California Las Vegas Salt Lake City Phoenix Denver Colorado Springs Des Moines Omaha Kansas City Chicago St. Louis Atlanta Philadelphia Northern Virginia Northern New Jersey Dallas Houston Northern Florida Source: from CBRE, ASHRAE

17 State construction employment change (U.S.: 3.6%) 8/14 to 8/15: 36 states + DC up, 1 unchanged, 13 down Over -10% -5.1% to -10% -0.1% to -5% 0% 0.1% to 5% 5.1% to 10% Over 10% 8% 3% 8% 6% 10% 6% 3% -0.4% -0.4% -5% 6% 0% 3% -0.2% 8% 6% -1% 9% 0.5% 14% 2% 3% -3% 2% 5% -7% 4% 3% -6% 1% -15% 7% 9% 4% 3% 2% -2% CT 3% DE 6% MD 4% NH 1% VT -2% MA 4% RI -8% NJ 3% DC 1% 6% HI 6% 2% -2% 6% Shading based on unrounded numbers Source: BLS state and regional employment report

18

19 Metro construction employment change 8/14 to 8/15: 163 metros up, 42 unchanged, 153 down Over -10% -5.1% to - 10% -0.1% to -5% 0% 0.1% to 5% 5.1% to 10% Over 10%

20 Hardest positions to fill (% of respondents who are having trouble filling) Hourly craft professionals 79% Carpenters 73 Sheet metal installers 65 Concrete workers 63 Electricians 60 Salaried professionals 52% Project managers/supervisors 55 Estimators 43 Engineers 34 Source: AGC Member Survey, Sept

21 How contractors are coping with worker shortages Increasing compensation: Hourly Salaried Raising base pay 56% 48% Providing incentives/bonuses Increasing contributions/benefits Paying more overtime 16 4 Increasing use of: Subcontractors 43% Staffing company 33 Labor-saving equipment, tools, machinery 19 Lean construction 13 Offsite prefabrication 9 Unions 9 Building information modeling (BIM) 7 Source: AGC Member Survey, Sept

22 Unemployed construction workers, Aug Aug (not seasonally adjusted) 2,000,000 1,750,000 1,500,000 1,250,000 1,000, , , , Source: BLS

23 Producer price indexes for key inputs, 12/10-8/15 (Dec. 2010=100) 150 Gypsum products 150 Copper & brass mill shapes / Latest 1-mo. change: -0.9%, 12-mo.: -1% 75 12/ Latest 1-mo. change: -4.0%, 12-mo.: -14% Flat glass Aluminum mill shapes /10 12/ Latest 1-mo. change: 0.9%, 12-mo.: 5% Latest 1-mo. change: -0.3%, 12-mo.: -10% Source: Author, based on BLS producer price index reports

24 Producer price indexes for key inputs, 12/10-8/15 (Dec. 2010=100) 150 Diesel fuel 150 Concrete products / Latest 1-mo. change: -2.2%, 12-mo.: -38% 75 12/ Latest 1-mo. change: -0.3%, 12-mo.: 3% 150 Paving mixtures 150 Steel mill products /10 12/ Latest 1-mo. change: -0.9%, 12-mo.: -4% Latest 1-mo. change: -0.7%, 12-mo.: -14% Source: Author, based on BLS producer price index reports

25 Trends: Total construction spending: +6% to +10% per year weak SF housing, retail; flat public spending new drivers: shale-based gas & oil; Panama Canal widening; more elderly & kids, fewer young adults Materials costs: -1 to +3% (similar to CPI); rare spikes Labor costs: +2.5% to + 5% Labor supply: widespread shortages possible due to retirements, competition from other sectors, fewer vets Source: Author

26 Summary for 2014, forecast 2014 actual Jan.-July YTD 15 vs. 14 Total spending 5% 9% 6-10% Private residential 4% 10% 1-10% nonresidential 11% 11% 1-10% annual average forecast Public 2% 5% near 0 Materials PPI -0.9% (Jul) -3% 0-3%; rare spikes Employment cost index 1.8% (Q2) 2.1% 3-5% Source: : Census, BLS; : Author s ests.

27 AGC economic resources ( The Data DIGest: weekly 1-page (subscribe at monthly press releases: spending; PPI; national, state, metro employment state and metro data, fact sheets: webinars: 10/1 ( 11/19 w/ AIA, CMD ( for link)