New Residential Construction Spending Rises at a Slower Pace in November
01/23/2013 by Bernard M. Markstein
New residential construction spending increased 1.2% on a seasonally adjusted (SA) basis in November after soaring 3.8% in October. Although a solid gain, November marked the first time in eight months that spending increased by less than 1.5%. Not seasonally adjusted (NSA) year-to-date spending was up 18.7% over 2011. Single-family construction spending advanced 1.3% in November after increasing 3.7% in October. Multifamily construction spending moved up 0.7% after jumping 4.1% in October. Year-to-date, single-family construction spending was up 18.6% and multifamily spending was up 19.1% compared to the same period in 2011.
Residential Construction Spending Data
(Billions of Current Dollars) |
Monthly Figures (1)
(latest actual values) |
3-Month Moving Average |
Year-to-Date (NSA) |
| Sep-12 |
Oct-12 |
Nov-12 |
Sep-12 |
Oct-12 |
Nov-12 |
Jan-11 to
Nov-11 |
Jan-12 to
Nov-12 |
| New Single-family |
136.4 |
141.4 |
143.3 |
131.9 |
136.5 |
140.4 |
99.9 |
118.4 |
| Month-over-Month % Change |
3.6% |
3.7% |
1.3% |
2.8% |
3.5% |
2.9% |
| (Year-over-year % change of NSA data) |
25.3% |
29.6% |
30.2% |
-4.6% |
18.6% |
| New Multifamily (2) |
28.4 |
29.6 |
29.8 |
28.1 |
28.7 |
29.3 |
20.8 |
24.8 |
| 1.2% |
4.1% |
0.7% |
1.2% |
2.2% |
2.0% |
| 20.6% |
30.9% |
29.7% |
-6.7% |
19.1% |
| New Residential (3) |
164.8 |
171.0 |
173.1 |
160.0 |
165.2 |
169.7 |
120.7 |
143.2 |
| 3.2% |
3.8% |
1.2% |
| 24.5% |
29.8% |
30.1% |
-5.0% |
18.7% |
| Residential Improvements (4) |
132.1 |
129.7 |
128.7 |
129.0 |
130.3 |
130.2 |
106.4 |
115.8 |
| 2.3% |
-1.9% |
-0.7% |
1.9% |
1.0% |
-0.1% |
| 19.5% |
10.7% |
6.7% |
1.6% |
8.8% |
| Total Residential (5) |
296.9 |
300.7 |
301.9 |
289.0 |
295.5 |
299.8 |
227.1 |
259.0 |
| 2.8% |
1.3% |
0.4% |
2.3% |
2.3% |
1.5% |
| 22.3% |
20.2% |
19.4% |
-2.0% |
14.0% |
|
January’s U.S. Jobs Increase the Same as Monthly Average Since Trough
02/01/2013 by Alex Carrick
U.S. total employment in January 2013 was +157,000 according to the latest Employment Situation report from the Bureau of Labor Statistics (BLS).
January’s level of net new positions, derived from a survey of establishments (i.e., employers), was about what most analysts had been expecting. It was down from December’s month-over-month change of +196,000 and November’s +247,000. Prior to November and dating back to March, the month-to-month changes were between +90,000 and +165,000.
There are a couple of other estimates of U.S. employment gains each month. The household survey from the BLS, on which the unemployment rate is based, yielded an increase in net new positions of only 17,000.
At the other extreme, according to ADP’s National Employment Report, the number of private sector jobs in the U.S. increased by 192,000 in January. That was after an increase of 185,000 in December.
Automatic Data Processing Inc. (ADP) based in Roseland, New Jersey, bills itself as a leading provider of human capital management services. Its employment report is produced in collaboration with Moody’s Analytics.
The “official” unemployment rate calculated by the BLS increased slightly to 7.9% in January from 7.8% the month before. The overall improvement in employment prospects is bringing more adults back into the work force.
The relatively strong employment increase in January was to be expected given that the level of initial jobless claims has been so modest of late. The latest four-week moving average (as of January 26, 2013) was only 352,000.
Most of the increase in U.S. total employment in January originated in the private services sector (+130,000), with retail trade (+33,000) as the standout sub-category. Private and business services (+25,000), education and health (also +25,000) and leisure and hospitality (+23,000) were other sources of strength.
Private services account for 70% of all jobs in the U.S. Add in the public sector and the proportion rises to 86% of total employment.
The public sector has been focusing on belt-tightening over the past year or two. “Government” downsized by another 9,000 jobs in January. It’s the only major sub-sector in which total employment year over year has declined (-74,000).
How did our industry do in January? Construction had a good month. The total number of on-site jobs rose by 28,000. Specialty trade contractors (+26,000) provided almost all of the increase.
On a year-over-year basis, the number of construction jobs has risen by 102,000. Half of that gain (+51,000) has originated with residential specialty contractors.
Jobs in the residential sector will continue to climb in the months ahead as a result of the solid improvement in housing starts that is underway. New home groundbreakings in December were 952,000 units seasonally adjusted and annualized, +37% versus December of the year before.
New home starts at this time are weighted more heavily towards the multi-unit market, which requires some workers with different skill sets than in single-family construction.
Manufacturing employment (+4,000) in January was basically flat. On a year-over-year basis, its numerical increase (+109,000) was just about the same as for construction (+102,000).
Total employment in the U.S. in January 2013 versus the first month of last year was ahead by slightly more than 2.0 million.
Demonstrating that time does fly, it has been 35 months or nearly three years since the recessionary trough for U.S. total employment in February 2010.
Since then, there have been 5.5 million net new jobs created. That’s an average monthly increase of 157,000 – which, remarkably enough, is exactly the same figure as occurred in January 2013.
A lingering problem for the economy, however, is the fact that 8.7 million jobs were lost in a very short time frame (25 months) between January 2008 and the second month of 2010.
In an encouraging note, private services employment has done more than its fair share. It experienced a 4.6 million decline in employment from peak to trough once the recession took hold. But in the last three years, the number of private service sector jobs has risen by 5.3 million, a significantly greater amount.
During the 20 years prior to the most recent recession, U.S. “real” (i.e., inflation-adjusted) gross domestic product (GDP) increased at an average annual rate of about +3.0%. The accompanying year-over-year gain in total employment was often on the order of +2.5%.
The current expectation for economic growth is now closer to +2.0% and U.S. total employment in January was +1.5% year over year. The high jobless rate of 7.9% will gradually improve, but only after a long and frustrating struggle.
U.S.: month-to-month total job creation
December Nonresidential Construction Materials Project Prices Down Again
02/15/2013 by Bernard M. Markstein
Overview
Prices for inputs used in nonresidential construction fell for the third month in a row. In the near term, the outlook is for limited increases in building materials prices as companies delay investments until the threats of sequestration (across the board reduction in most federal spending) and of the federal debt ceiling becoming effective are eliminated. After that, expect prices to rise roughly in line with or slightly faster than overall inflation. Greater than forecasted growth would result in higher building materials price inflation.
Construction Materials Inflation
The Producer Price Index (PPI) for materials and components used in construction rose 0.3% on a seasonally adjusted (SA) basis in December after rising 0.1% in November according the Bureau of Labor Statistics (BLS). It was also the fifth monthly increase in a row. The index was up 2.7% on a not seasonally adjusted (NSA) year-over-year basis and was up 8.9% since December 2009. Meanwhile, prices for raw materials used in construction or to produce products used in construction increased 0.6% after declining 0.4% in November. The index was up 2.7% from December 2011 and up 6.0% from December 2009.
An index that measures inputs used in nonresidential construction (excluding capital equipment) fell 0.3% (NSA) in December after dropping 1.3% in November. On a year-over-year basis, the index was up 0.8% in December.
Construction Economic Notes – February, 2013
02/15/2013 by Bernard M. Markstein
The United States economy continues to chug along despite numerous hindrances. At first glance, the preliminary report for fourth quarter 2012 gross domestic product (GDP) would seem to contradict this view. According to the Bureau of Economic Analysis, real (inflation-adjusted) GDP growth decreased 0.1% at a seasonally adjusted annual rate (SAAR). This apparent stall in the economy was largely due to a plunge in defense spending and a drop in business inventories. The sharp fall in defense spending is unlikely to repeat unless sequestration goes into effect on March 1. The decline in business inventories appears to be unintended and is likely to be reversed in coming months, adding to growth in the near term.
The growth figure is an advance estimate based on incomplete data and subject to revision. There are several reasons to expect that fourth quarter growth will be revised up in future reports.
The GDP numbers included a 1.1% (SAAR) decrease in investment in nonresidential structures. This estimate was based on data released in January and did not include the more positive numbers released in early February. The Census Bureau reported that total commercial construction spending rose 0.9% in December from November. The report included an upward revision in the October and November spending numbers: $8.0 billion and $11.0 billion, respectively. Thus, expect the nonresidential structures number for the GDP accounts to be revised up in subsequent reports.
Exports were reported as falling 5.7% (SAAR) in the fourth quarter GDP numbers, reducing GDP growth by 0.8%. However, December export data, which were not available at the time of the preliminary GDP estimates, came in stronger than expected. As a result, exports will likely be revised up in next month’s GDP report.
Further, there was some positive news buried in the GDP numbers. Among the items of interest were:
- Personal consumption expenditures (PCE) continued to show strength, up 2.2% compared to 1.6% in the third quarter, an indication the consumer is feeling more confident and is willing to spend
- Residential construction increased a robust 15.3%, a reflection of the continuing recovery in the housing market
- The PCE price deflator, one of the key indicators the Federal Reserve uses to measure inflation and guide Fed monetary policy, rose a moderate 1.2% (SAAR) in the fourth quarter. The PCE was up only 1.5% on a year-over-year basis—well within the guidelines set by the Fed to maintain its current low interest rate target
Among recent positive indicators for the economy is nonfarm payroll employment, which increased 157,000 in January. Even more positive was the annual benchmark revision of 2012 employment. Non-farm payroll employment was revised up an average of 494,000 per month. The fourth quarter average monthly increase was revised from 151,000 to 201,000.
Seasonally adjusted (SA) construction employment increased for the eighth month in a row, up 28,000 in January to 5,731,000—its highest level since September 2009. The not seasonally adjusted (NSA) construction unemployment rate was 16.1%, down from 17.7% in January 2012. Reports of spot labor shortages in construction are beginning to trickle in from some parts of the country.
Despite recent positive economic news, the economy faces various negatives that are already adversely affecting growth and could send the economy back into recession. Congress passed, and the president signed into law, a measure temporarily increasing the debt ceiling until May 18—delaying the possible shutdown of much of the federal government and the potential default on Treasury securities. Raising the debt ceiling only delays the potential harm to the economy.
With the debt ceiling temporarily lifted, the immediate threat is now sequestration, the automatic across-the-board cuts in most federal spending, set to occur on March 1 unless a budget agreement reduces federal spending or Congress pushes back or eliminates the deadline altogether. The threat of sequestration is already having an adverse effect on normal government operations and current economic activity.
The most visible example is the delayed deployment of the USS Harry S Truman to the Gulf, cutting the United States’ normal carrier presence in that part of the world from two to one. Although less visible, several government contractors have delayed hiring plans or have furloughed employees – creating an additional drag on the economy and potentially increasing the cost of many affected projects. Long-run planning and any associated cost savings go out the window when these companies are forced to react to the short-run machinations of federal budgeting.
Other recent construction-related economic news included:
- December total commercial construction spending: $885.0 billion (SAAR), +0.9% from November; +9.2% for the year. October and November numbers were revised up $8.0 billion and $11.0 billion, respectively; up 0.9% and 1.3% from their previously reported levels
- Nonresidential building construction spending: $301.0 billion, +1.0% from November; +5.6% for the year. October and November numbers were revised up $3.0 billion and $2.2 billion, respectively; up 1.0% and 0.8% from their previously reported levels. Manufacturing construction spending rebounded after two months of relatively weak growth to increase 2.5% in December. For the year, it was up 17.2%
- Heavy engineering construction spending: $269.4 billion, -0.5% from November; +7.4% for the year. November was revised up $2.3 billion, up 0.9% from its previously reported level. Power construction spending increased 1.4% in December and was up 24.9% for the year
- New residential construction spending: $176.4 billion, +1.4% from November; +19.6% for the year
- Private construction spending increased $12.0 billion (+2.0%) from November, its tenth consecutive monthly increase (November, which was initially reported as a $1.0 billion decline, was revised up $13.1 billion); +16.1% for the year
- Public spending fell $4.0 billion (-1.4%) in December; -2.7% for the year
- The AIA Billings Index fell from 53.2 in November to 52.0 in December. Despite the decline, the index remained above 50, indicating increased billings, a positive sign for future commercial construction. It was the fifth month in a row with a reading above 50.
- The December Producer Price Index (PPI) for building materials prices (does not include labor costs) rose 0.3% (SA) after rising 0.1% in November and was up 2.7% from December 2011.
- An index of prices for inputs to nonresidential construction declined 0.3% (NSA) in December following a 1.3% drop in November. On a year-over-year basis, the index was up 0.8%.
KEYSTONE XL
This is the perfect time to get started on all of the approvals that are going to be needed to start and finish the pipeline.Starting in Canada and passing through eight states to get to the Texas refineries is not going to be a piece of cake,but when it is up and running the eight hundred thousand barrels of crude oil every day bought from our friends up north is a lot better than having to buy the same amount from the middle east where the friendship and political stability is always a little bit of a question mark.
The people who are against this project because of concerns about spills and such have to realize that we need the oil,we need the energy that comes from that oil,the amount of energy we now get from the sun,wind,tide,geothermal amounts to less than five percent of current needs. So even if we triple that we still are going to need thirteen million barrels of oil every day,the only question that needs to be addressed is who are we going to buy it from,and you have lots of choices,Mexico,South America,North Sea,Alaska pipe line,OPEC or Canada or we can increase our production in the lower forty eight. Their is no way to get around the fact that we need oil and lots of it.
By Ernest Scheyder
Sat Jan 19, 2013 5:06am EST
(Reuters) – Caterpillar Inc uncovered "deliberate, multi-year, coordinated accounting misconduct" at a subsidiary of a Chinese company it acquired last summer, leading it to write off most of the value of the deal and wiping out more than half its expected earnings for the fourth quarter of 2012.
Shares of Caterpillar fell 1.5 percent in afterhours trading following news of the fraud, which was discovered after problems were found with the Chinese company’s inventory.
Caterpillar, the world’s largest maker of tractors and excavators, said on Friday it would take a non-cash goodwill impairment charge of $580 million, or 87 cents per share, in the quarter.
Analysts had expected the company to report $1.70 per share when it reports its results on January 28, according to Thomson Reuters I/B/E/S.
Caterpillar closed the purchase of ERA Mining Machinery Ltd and its subsidiary Siwei, China’s fourth-largest maker of hydraulic roof supports, last June, paying HK$5.06 billion, or $653.4 million. ERA had been publicly traded in Hong Kong, doing business through Siwei, which is known for making equipment to support roofs in mines.
A member of the Caterpillar board during the course of the Siwei deal told Reuters the board was distracted at the time by a larger transaction and paid relatively little attention to the Siwei acquisition.
"It came as a complete surprise to us," the former board member said of the fraud, speaking on condition of anonymity because of the sensitivity of the situation. "It was presented to us as a pretty straightforward transaction. It’s a shame. It should have been investigated further."
The source said the driving force behind the deal was Ed Rapp, the former Caterpillar chief financial officer who now serves as a group president with responsibility for China, among other operations. The source said it was Rapp who presented the deal to the board and pushed for its completion.
A Caterpillar spokesman declined to comment on Rapp’s role in the deal. Rapp could not be immediately located for comment.
REVERSE TAKEOVER
At the time of the Caterpillar purchase, ERA Mining was listed in the Growth Enterprise Market (GEM) of the Hong Kong stock exchange, which is "designed to accommodate companies to which a higher investment risk may be attached," according to the offering circular filed by Caterpillar last year in Hong Kong.
The company was previously known as ERA Holdings Global Ltd. and provided "corporate secretarial services" before being acquired by Siwei in September 2010 through a reverse takeover.
Caterpillar’s write-off could revive concerns over accounting scandals and corporate governance issues of Chinese companies voiced by investors including Muddy Waters founder Carson Block.
Reverse takeovers have been of particular concern, since most of the recent accounting scandals in the United States have come from small Chinese companies who went public via a reverse takeover, including China MediaExpress Holdings Inc. A Hong Kong arbitration panel on Wednesday ruled China MediaExpress was a "fraudulent enterprise."
‘COMPLETELY UNACCEPTABLE’
In a statement, Caterpillar said an ongoing investigation launched after the deal closed "determined several Siwei senior managers engaged in deliberate misconduct beginning several years prior to Caterpillar’s acquisition of Siwei."
According to a question-and-answer dialog Caterpillar included in its statement, the company found discrepancies in November between the inventory in Siwei’s books and its actual physical inventory, triggering the probe.
The company also said it had replaced several senior managers at Siwei, adding that their conduct was "offensive and completely unacceptable."
Representatives for Siwei didn’t respond to calls and requests for comment on the Caterpillar announcement. The company employs about 4,000 people in Zhengzhou and produces hydraulic roof supports used to prevent rocks from falling into a coal mine’s working area.
Siwei competes with market leader Zhengzhou Coal Mining Machinery, according to Zhengzhou Coal’s IPO prospectus filed in November.
Citigroup and law firm Freshfields Bruckhaus Deringer LLP served as financial and legal advisers to Caterpillar on the transaction. Blackstone and DLA Piper acted as ERA’s financial and legal advisers.
Freshfields said in an emailed statement that it wasn’t able to comment on client matters. Representatives for Blackstone, Citigroup and DLA Piper didn’t respond to requests for comment on Saturday.
CHINA AMBITIONS
The Siwei deal came as part of Caterpillar’s larger ambitions in China. In early 2012, it added Jon Huntsman, the former U.S. ambassador to China, to its board of directors.
The company, which already has 23 manufacturing facilities in China and four more under construction, said the Siwei episode would not change its strategy in the country.
Caterpillar’s experience with Siwei may also renew focus on the standoff between the U.S. Securities and Exchange Commission and audit firms over access to accounting documents of U.S.-listed Chinese companies suspected of fraud.
While Siwei was not U.S.-listed, the broader accounting question has been a thorny one for U.S. companies looking to grow their business in China.
($1=HK$7.75)
Georgia College of Construction News 