Vol. 24, No. 38 October 7-11, 2024
Input and bid-price PPIs remain tame in September; hurricanes may affect equipment availability
Input prices decreased in September, while bid prices for construction posted mild monthly and year-over-year (y/y) gains, according to data the Bureau of Labor Statistics (BLS) posted on Thursday. The producer price index (PPI) for new nonresidential building construction—a measure of prices that contractors say they would bid to erect a fixed set of buildings—inched up 0.1%, not seasonally adjusted, from August and rose 1.2% over 12 months. The PPI for material and service inputs to new nonresidential construction declined 0.6% for the month and 1.0% y/y. Inputs with notable 1- or 12-month changes include: diesel fuel, down 15% for the month and 36% y/y; steel mill products, down 1.3% and 12%, respectively; and copper and brass mill shapes, down 1.1% for the month but up 11% y/y. AGC posted tables of construction PPIs. Prices for PPIs were collected before Hurricanes Helene and Milton hit. Separately, BLS invited PPI users to participate in its user survey. BLS stated, “The survey will only take a few minutes and the information you provide will help us improve our products to better meet your needs.”
The hurricanes have caused tragic loss of life and horrific damage to homes, buildings, and infrastructure. Readers are invited to send information about storm impacts on projects, prices, and supply to ken.simonson@agc.org. One potential impact on construction is equipment availability. Investment firm TRG posted on Tuesday, “Given the significant weather events impacting multiple Southeastern states, our contact expects a large amount of fleet to be moved to those areas for clean-up activity. Intuitively, the larger equipment rental companies that have a broad geographic network of stores can capture this demand more efficiently than local rental companies. However, in our view, this has the effect of increasing utilization in the industry and tightening supply/demand broadly.”
“Used equipment prices have largely plateaued over the last year, and there are further signs that a slight price dip may even be coming,” Engineering News-Record reported on September 30, citing market sector analyst EquipmentWatch. “EquipmentWatch data shows…there has been a parallel decline in machine age and usage, suggesting that equipment fleets are trending toward regular refreshes, rather than hanging onto old iron.”
The Dodge Momentum Index fell 4.2% in September but increased 21% y/y, Dodge Construction Network reported on Monday. The index “is a monthly measure of the value of nonresidential building projects going into planning, shown to lead construction spending for nonresidential buildings by a full year.” Commercial planning declined 7.8% for the month but jumped 31% y/y. Institutional planning rose 5.2% for the month and 4% y/y. “Commercial planning generally receded over the month. After gaining some steam in recent months, warehouse, office, and stores planning activity all slowed down. Hotels, on the other hand, have been gaining speed over the past five months, expanding steadily in September. Data centers continued to dominate large project activity, but the rate at which planning projects entered the queue continued to moderate from the above-average levels of growth in recent months. On the institutional side, education, healthcare, and recreational projects were the primary drivers of this past month’s expansion.”
“The amount of industrial real estate under construction in the third quarter fell to 309 million square feet, down 43% from the previous year and the steepest drop since 2008, according to real-estate services firm Cushman & Wakefield,” the Wall Street Journal reported on Saturday. “Developers are paring back their expansion plans as companies have held off on making leasing decisions and higher interest rates have pushed up borrowing costs….The vacancy rate for industrial real estate climbed to 6.4% in the third quarter, up from 4.6% in the same period a year earlier to the highest quarterly level since the end of 2014, according to Cushman.” In addition, “The amount of U.S. warehouse space listed for sublease reached a record high of nearly 199 million square feet in the third quarter, up 45% from the previous year and far above the previous peak of 124 million square feet of sublease space available in 2009, according to real-estate services firm Savills,” the Journal reported on Tuesday.
“Construction was the top industry sector (70,571 firms) for Hispanic-owned businesses” in 2021, the Census Bureau reported on Thursday. There were 7,363 construction firms owned equally by Hispanic and non-Hispanic owners and 668,779 non-Hispanic construction firms (second-most numerous sector after professional, scientific, and technical services). “A business is considered Hispanic-owned when 51% or more of the stock or equity is held by Hispanic owner(s) of any race. [The totals exclude] unclassifiable firms like public firms, nonprofits, and those without an owner who holds at least 10% of the business.”