The Construction Monthly Metals Index (MMI) fell by 2.9% from April to May, with construction spending averaging a very minor increase.
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According to the U.S. Census Bureau, non-residential construction spending fell 1.2% from February to March. Overall construction spending still managed a 0.1% increase, however, as residential construction rose 1% in March. Meanwhile, public construction spending continues to move sideways, showing a modest 0.2% decline. Public construction is getting a boost from the U.S. Infrastructure Bill, which is expected to lift spending over the course of the next 5 years. While other U.S. steel prices substantially declined from last year’s peaks, the bill and its Buy American provisions have held plate prices near all-time highs. Even so, plate prices have dropped considerably over the past week.
According to the Associated General Contractors of America (AGC), a shortage of skilled workers and the disrupted supply chain have held back the construction these past few months. AGC’s Chief Economist noted, “contractors continue to report strong demand for most types of structures, with few owners canceling or postponing planned projects. But worker shortages and supply-chain problems, from lockdowns in China to the war in Ukraine, are slowing down project completions.”
Construction industry employment data appears to mirror industry spending trends. According to preliminary data from the U.S. Bureau of Labor Statistics, the construction sector added 2,000 jobs from March to April as the unemployment rate within the sector fell to 4.6%. However, employment for non-residential specialty trade contractors fell by 6,400 jobs. This suggests that the constraints brought on by a lack of skilled labor within non-residential construction will continue into the next month.
According to Anirban Basu, Chief Economist of the Associated Builders and Contractors (ABC), “For now, the labor market remains strong as contractors and other employers compete for scarce skill sets.” He went on to note that “many construction firms report operating at full capacity. Hiring is a mechanism to expand that capacity. But with the cost of capital, materials, and labor rising, demand for private construction services could soften next year. The risk of recession continues to rise.”
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While concerns over future construction demand persist, the Architecture Billings Index (ABI) hit one of its highest scores since the beginning of the economic recovery. The ABI is a leading indicator of non-residential construction activity. March’s score of 58 suggests demand remains robust despite the ongoing complications of labor constraints, supply chain disruptions, and historically high inflation. Looking ahead, backlogs hit a new all-time high, averaging 7.2 months. Meanwhile, the value of new design contracts increased from a score of 55.2 in February to 60.5 in March.
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