Construction Prices for the North American Institutional sector are trending back to 4% per annum for the near term, down from 6% annually earlier this year.
Due to consistent increases in construction costs over the past few years, Vermeulens Index long term trend line is up from 3.3% to 3.4%.
Energy and commodity prices have declined lately, offsetting the spike in metals and leaving the Dow Jones Commodities Index relatively flat.
Construction Dollar Volume has increased by 4.7% year over year (Sept 17/Sept 16). Year over year growth can be attributed to Residential and Infrastructure spending. Non-Residential spending has declined 1.3% year over year.
The New York Stock Exchange remains at all-time highs, with Q3 seeing the NYSE break the 12,000 range for the first time and yielding a 4% increase in equities.
Monthly job growth at the end of Q3 sits at 154,000 jobs, showing a continuation of the downward shift from the 249,000 average seen in the second half of 2014. This quarter’s drop was heavily attributed to the low rate of jobs added in September, likely due to the hurricanes. The Federal Reserve notes 12-month inflation is below the 2 percent objective. Storm-related disruptions and rebuilding will affect economic activity in the near term, but past experience suggests that the storms are unlikely to alter the course of the national economy over the medium term. Due to economic strength and current full employment conditions, the federal funds rate target range has been maintained and quantitative easing is to begin being reversed in October under the rubric of “balance sheet normalization”.
We are at full employment in the US construction sector. The first 3 quarters of 2017 have added 102,000 construction jobs nation-wide or 1.5%. Wage and profit increases in the sector will continue to draw employment from new entrants and other sectors. Strong margins in the construction sector are continuing to expand supply. This will have a moderating effect on price increases. Continued weakness in nonresidential construction spending is expected to result in reduced escalation in this sector.
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