- MARKET SECTORS
- Al Levi: Managing Your Business
- John Siegenthaler: Hydronics Workshop
- Dan Holohan: Heating Help
- Julius Ballanco: Plumbing Primer
- Paul Ridilla: Practical Management
- Kenny Chapman: Blue Collar Coach
- Adams Hudson: Marketing Strategies
- Jim Hamilton: The Bottom Line
- Ray Wohlfarth: The Boiler Room
- Morris Beschloss: Beschloss Perspective
- Bob Miodonski: Editorial Opinion
- WEB EXCLUSIVES
But much higher one-month and 12-month comparisons appear to be ahead for many construction PPIs. Today the price of West Texas Intermediate crude oil on the New York Mercantile Exchange rose for the fifth straight day, to a record of more than $86 per barrel. The national average retail price of on-highway diesel fuel was unchanged from last week at $3.04 per gallon but up 21% from a year ago, the Energy Information Administration reported today. Copper futures are also rising and are more than 10% higher than a year ago.
Recent reports suggest a mixed outlook for retail construction. Retail and food services sales rose 0.6% in September, seasonally adjusted, and 5% from a year earlier, the Census Bureau reported on Friday. The gain was considerably larger than reports earlier last wek of “same-store” sales for major chain stores. The Census numbers include an estimate of sales from new stores, smaller retailers, and categories not included in the chain-store reports (such as automobile dealers, gas stations, food and beverage stores, restaurants, and mail-order and online retailers), making them potentially a better indicator of demand for retail construction. Kohl’s Corp. opened 80 stores on October 3 and said it plans to open 566 outlets over the next five years, increasing its store count by more than 67%. The Wall Street Journal reported on October 3 that British retailer Tesco PLC plans to open its first five stores in southern California on November 8 and to have 50 stores in western states by the end of February. But Wal-Mart has halved its expansion plans. The Journal reported on Wednesday, “U.S. strip-mall vacancies only inched up in the third quarter, but still hit a 5-1/2 year high...Rentals of retail space in weak housing markets are getting hit disproportionately hard [such as Sacramento, Orlando,] Miami, Tampa, Phoenix,” and Orange, Riverside and San Bernadino Counties in California. “In Florida, sales-tax collections have slipped [2.7% in August and 6.1% in July], signaling falling spending…according to the Florida Department of Revenue.” But “retail in most of the rest of the country is still solid….Shopping-mall vacancies have shown no impact from the housing problems yet. Because of malls’ long lease terms, economic problems typically take 18-24 months to show up,” much longer than at strip malls.
Job openings in construction fell by 15,000 in August, seasonally adjusted, and by 33,000 (18%) compared to August 2006, BLS reported on Wednesday. Hires dropped from July but edged up 2% from a year ago. Total separations (quits, layoffs, discharges, retirements and other) were virtually unchanged from July but up 11% from a year before. In the rest of the economy all of these indicators were more stable over the month and year. The falling openings and rising separations may reflect the shrinking home construction industry, while rising hires may stem from a pickup in nonresidential work. BLS listed construction among “several industries [that] consistently have high rates of both hires and separations.”
Although construction firms have large fluctuations in employment, the firms themselves do as well or better than others at surviving. A study published in the September issue of the Monthly Labor Review tracked the survival and longevity rates of establishments (fixed business locations as distinct from temporary job sites) in construction and other industries (www.bls.gov/opub/mlr/2007/09/art1full.pdf). The study tracked 212,000 new establishments that first reported employment data in March-June 1998. There was almost no difference in the survival rate for construction firms compared to all firms. For both construction and all firms, in each of the first four years about 20% of the establishments that existed one year before had closed. In the fifth year, the survival rate climbed to 86-87%, then 90% in years 6 and 7. The seven-year survival rate (1998-2005) for construction, 37%, was well above the 31% overall rate and ranked third out of 10 broad sectors.