AGC Data DIGest: June 6-14, 2022
Contractors’ bid prices rose at about the same rate as their input costs for the first time since September 2020, according to Bureau of Labor Statistics data released today. However, for the month, the change in input costs in May exceeded the change in bid prices, implying that pressure on contractor profit margins will persist. Specifically, the producer price index (PPI) for materials and services inputs into new non-residential construction rose 1.9% for the month and 18.9% year-over-year. The PPI for construction of new non-residential buildings – a measure of the price contractors say they would bid to construct a fixed set of buildings – rose 0.4% for the month and 19.3% year-on-year annual. Costs rose faster than bid prices for a wide range of inputs in the cost index: diesel fuel, up 12% for the month and 85% year-on-year; liquid asphalt, 16% and 80%, respectively; steel products, 11% and 33%; architectural coatings, 0.8% and 32%; factory forms of aluminum, -3.8%% and 31%; plastic construction products, 1.7% and 30%; transport of goods by truck, 2.9% and 26%; and plaster building materials, 7.9% and 24%. Several other input PPIs grew at double-digit rates year-over-year: Asphalt and Tarmac Roofing and Siding Products, 2.0% for the month and 19% year-on-year on the other ; insulation materials, 0 and 17%, respectively; mixes and paving blocks, 2.4% and 16%; and construction machinery and equipment, 0.3% and 12%. In contrast, the PPI for wood and wood products fell 15% year-on-year despite rising 1.4% in May. Bid prices, as measured by PPIs for new buildings, fell 0.1% for the month but climbed 31% year-on-year for new warehouse construction; increased by 0.9% and 23% respectively for industrial buildings; 0.6% and 19% for offices; 0.1% and 15% for healthcare buildings; and remained unchanged over the month but up 15% y/y for school buildings. PPI increases for new work, repair and maintenance by subcontractors were 0.3% for the month and 20% year-on-year for concrete contractors; 1.0% and 18%, respectively, for roofs; 0.5% and 15% for plumbing; and 0.7% and 12% for electrical contractors. AGC has published construction PPI tables.
There have been mixed changes in construction input prices since the BLS collected prices for PPI calculations around May 11. the past five weeks and $2.43 (74%) a year ago. An Illinois-based mechanical contractor reported on May 26 that makers of rooftop air conditioning units have raised prices by 20% to 50%, in part to meet new efficiency requirements. Lead times for 7.5 to 27.5 ton units from one manufacturer were approximately 25 weeks. An Ohio-based contractor received a notice from a ready-mixed concrete and stone supplier on June 1 that “all aggregates will increase by approximately 5%,” effective June 1, “the ready-mix concrete will increase an additional $4″ per cubic yard, effective July 1, and “fuel surcharge will be $25 per load (subject to change).” Readers are encouraged to send pricing and availability information to [email protected]
One cost category that may soon improve is freight costs, Cass Information Systems reported Monday, “2022 has seen a big improvement in driver availability and a flattening of freight demand. This is of a deflationary mix, although it will take several months to move from spot market to contracted rates, however any decline in underlying freight rates will likely be tempered by rapidly increasing diesel fuel surcharges.
The Dodge Momentum Index rose 7% in May from an upward-revised April reading and 17% year-on-year, Dodge Construction Network reported June 7. The index “is a monthly measure of the initial report for non-residential construction projects in the planning stages, which have been shown to lead in full-year non-residential building construction spending. In May, the institutional component of the Momentum index increased by 9% [and 8% y/y]and the commercial component increased by 6% [and 24% y/y]. The rise in the Dodge Momentum Index in May pushed the planning level above the most recent cyclical high of November 2021. During the month of May, business planning was driven higher by an increase in projects offices and hotels. Institutional planning has been boosted by an increase in education and health projects entering planning.
“Over the past 12 months, the cost to multi-family developers of compensating their employees has increased by an average of nearly 12%,” the National Association of Home Builders (NAHB) reported on May 30, based on results of its latest Multifamily Market Survey (MMS). “The first quarter 2022 MMS, sent electronically to a panel of multi-family developers on April 12, included a special question about rising compensation costs for nine specific job categories. At the top of the list, the cost of compensation for senior project managers has increased by an average of 14.8% over the past 12 months, followed by the cost of compensation for construction superintendents or supervisors (14.3%), project managers (12.6%) and project engineers (11.9%)…. On average for the nine job categories listed in the survey, compensation costs for employees of multi-family developers increased by 11.9% [y/y]. This is considerably higher than the 4.5% [y/y] increase in compensation costs for all civilian workers recently reported by » BLS.
“Following the aftermath of COVID-19, homebuyers’ preferences for the suburbs have waned,” NAHB reported on June 7, based on its homebuilding geography index. “On a four-quarter moving average, [y/y] On this basis, the single-family construction market share of large metropolitan suburban counties fell 1.3 percentage points to 24.8% from the first quarter of 2021. The market share of large metropolitan counties fell 0 .3 percentage points to 16.6%. All other regions, which can be grouped into “low density submarkets”, captured the above market share decreases. The market share of peripheral counties in major metropolitan areas increased the most, by 0.5 percentage points to 9.6% and non-metro and non-micro counties increased the least, by 0.1 percentage points to 4 .2%.