Part of the increase over 2005 is attributable to higher construction materials costs. On March 21, the Bureau of Labor Statistics (BLS) reported that the producer price index (PPI) for finished goods fell 1.4% from January to February, seasonally adjusted, and climbed 3.7% over the past 12 months. The “core” index, which omits energy and food costs, rose only 1.7% over the 12-month span. But the PPI for construction materials and components was up 0.4% for the month and 5.6% for the 12-month period. The PPI for materials used in highway and street construction jumped 12.1%, while indexes for single- and multi-unit residential, nonresidential, and other heavy construction rose 6-7%. Among specific construction inputs, notable 12-month increases included copper and brass mill shapes, 36%; diesel fuel, 31%; asphalt 27%; gypsum products, 25%; plastic construction products, 22%; and concrete products, 9.3%. The overall construction totals were held down by declines in steel mill products, -5.5%, and lumber and plywood, -2.7%.
Two government reports point to continued strength in manufacturing. On Friday, the Census Bureau reported that durable goods manufacturers' orders and shipments both increased in February for the fourth time in five months. On March 17, the Federal Reserve reported that industrial production in manufacturing was flat in February, seasonally adjusted, but had risen 4.2% over the past 12 months. Capacity utilization in manufacturing dipped from 80.5% of capacity in January to 80.4% in February, the Fed said, but remained above its 1972-2005 average of 79.8% for the fourth straight month. Together, sustained high levels of current production, new orders, and capacity utilization suggest the need for manufacturers to build more facilities. Output of construction supplies decreased 0.2% for the month but was up 6.2% from February 2005. The Fed noted, “Production gains for construction supplies have moderated so far this year after strong advances in the fourth quarter of last year.”
Reports on housing activity in February have been very mixed. On March 16, the government reported that building permits dropped 3.2%, seasonally adjusted, from January, but were 2.5% higher than in February 2005. Single-family permits were down 3.0% for the month but up 0.9% from the year-ago month. Multi-family permits were down 3.8% for the month but up 7.9% from February 2005. Housing starts dropped 7.9% for the month and 4.8% from February 2005. Starts in buildings with five or more units tumbled 36% for the month and 25% compared to the year-ago month. On Friday, the government said new single-family house sales fell 10% from January and 13% from February 2005. But on Thursday, the National Assn. of Realtors reported that sales of existing houses rose 5.2% from January and were just 0.3% below the February 2005 level.
Yesterday, the Bureau of Economic Analysis released estimates of personal income by state for 2005. Per capita personal income grew 4.6%, compared to 5% in 2004. “Growth rates in most states were tightly clustered about the national average; however, Louisiana's 9.1% decline was notably slower while Wyoming's 7.3% increase was notably higher,” BLS said. “The decline in Louisiana was a consequence of Hurricanes Katrina and Rita….Wyoming's strong performance is attributable to its mining industry.” Earnings (wage and salary disbursements, supplements to wages and salaries, and proprietors' income) rose 6.6%. Construction earnings contributed 0.65%, or nearly one-tenth of total earnings, although construction employment was only 5% of total employment. The largest contributions were in Nevada (2.6% of total earnings growth of 12.3%), Arizona (2.0% out of 11.8%), Hawaii (1.6% out of 8.0%), and Florida (1.6% out of 10.5%).
On March 20, BLS posted its first estimates of labor productivity in architectural and engineering services (www.bls.gov/lpc/iprsr06.pdf), covering 1987-2003. “Output per hour increased at an average annual rate of 1.4% in architectural sevices and 0.6% in engineering services over the period….Productivity growth in the architectural services industry was strongest during the first half of the 1990s, while, in the engineering services industry, productivity declined over the same period, but recovered in the latter half of the decade. From 2000 to 2003, productivity increased in architectural sevices but declined in engineering services.”