Construction Costs Are Cooling

The sharp slowdown in construction globally drove declines in many materials and building products in the second quarter. And competitive reactions to slower future markets pushed contractor prices lower. These were the observations of Turner Construction Vice President Attilio Rivetti, who compiled the Turner Building Construction Index (BCI) for the period. The BCI for the second quarter slipped lower to 1177. The decline was the first since 2010. Rivetti remarked that the third quarter should “more clearly define the fluctuation of escalation of cost in the construction industry.” You can download the report here.

Turner’s Building Construction Index fell by 1% during the 2nd quarter.

One week ago, the Bureau of Labor Statistics released its report on May’s inflation, including producer price indexes (PPI) for construction. The report showed costs for construction put in place were still up year-over-year, but that PPI inflation for all types of construction was roughly half what it was in January and February. For the first time in memory, inputs to construction across all types and trades were negative compared to May 2019. Across the board construction input deflation did not even occur during the Great Recession’s trough. You can read the tables prepared by the Associated General Contractors here.

Some random takes on the unemployment picture over the past week: Since the details on the Payroll Protection Program were revealed we’ve learned that firms employing a total of 51 million people received PPP loans. Since it’s estimated that roughly one-third of the people laid off during the April/May shutdown of the economy have returned to work, the number of people recalled by employers seeking to avoid repayment of the loans could be a drag on employment gains after PPP expires. If workers recalled by firms with PPP loans can’t be supported by revenues after the program expires, it’s likely more will fall back into unemployment. Wells Fargo Economics is forecasting that unemployment will stay above 8% in 2020 and remain above 6% through 2021.

One interesting economic data point to bear in mind during the debate over returning to schools is the fact that 23% of workers are the parent of a child under the age of 13.

Franjo Cosntruction has started work on the $7 million new Bowser Hyundai dealership in Chippewa Township, Beaver Co. Franjo is also the contractor for the new $10 million, 51-unit condo being developed by Solara Ventures at 26th & Penn. TEDCO Construction was awarded the general construction contract from DGS for the $3 million Ground Floor Renovation at the Cathedral of Learning. Mele & Mele & Sons was awarded the general contract for the Breakneck Creek Wastewater Treatment Plant Expansion in Adams Township, Butler County. Ferri Contracting was awarded the $6.3 million Kiski Pump Stations replacement in Leechburg. Derek Engineering was the successful contractor on the new Taco Bell in Chippewa Township.

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