Retailers, utilities
pull back.
The producer price index (PPI) for finished goods climbed 0.9% in
January, not seasonally adjusted (0.8%, seasonally adjusted), but fell 1.0%
compared to January 2008, the Bureau of Labor Statistics (BLS) reported on
Thursday. The PPI for construction inputs fell 0.3% for the month, not seasonally
adjusted, and rose 1.8% from a year earlier. The PPI for highway and street
construction inputs rose 0.4% in January and fell 1.4% over 12 months. PPIs for
other segments fell for the month but rose from a year before: other heavy
construction, -0.4% and 0.1%; nonresidential buildings, -0.3% and 1.2%;
multi-unit residential, -0.1% and 2.2%; and single-unit residential, -0.4% and
4.0%.
The divergent results reflect differing trends in prices of individual materials.
There were substantial increases in January in the prices of ready-mixed concrete,
2.3% for the month and 5.7% over 12 months, and its ingredients-cement, 1.2% and
0.9%, and construction sand/gravel/crushed stone, 1.3% and 6.0%. There were
also increases for gypsum products, 1.0% and 8.7%; construction machinery and
equipment, 0.4% and 4.9%; and plastic construction products, 0.3% and 3.5%.
Prices fell in January for aluminum mill shapes, -7.6% and -12%; asphalt paving
mixtures and blocks, -6.2% and 23%; steel mill products, -5.8% and -2.2%;
copper and brass mill shapes, -5.4% and 19%; and diesel fuel, -4.3% and -41%.
The consumer price index (CPI) for all
urban consumers rose 0.4% in January, not seasonally adjusted (0.3%, seasonally
adjusted), but was unchanged over a 12-month period for the first time since
1955, BLS reported on Friday. The CPI for urban wage earners and clerical
workers (CPI-W), which is used to
adjust many labor contracts in construction and other industries, fell 0.5%
over the past 12 months.
The value of
new construction starts fell 3% in January, McGraw-Hill Construction (MHC) reported
on Thursday, based on its own data compilation. “The housing sector continued
its extended slide, and it was joined by a further loss of momentum for
nonresidential building. At the same time, nonbuilding construction in January cushioned
the total construction downturn relative to December, with gains reported for
nonbuilding’s public works and electric utility segments. ‘The construction
starts data showed a declining trend over the course of 2008, and this has
continued through the first month of 2009,’ stated Robert A. Murray, vice president
of economic affairs for [MHC]. ‘January’s pattern was similar to what occurred
during 2008-more weakness for housing, combined with a mounting loss of
momentum for commercial building. At the same time, public works has been able
to hold up relatively well, even with the erosion in state and local finances.’
Nonresidential building retreated 11% in January, with offices -5%; stores, -21%;
hotels, -33%; and warehouses, -54%.”
Transportation terminal work “soared 515%. This
reflected the start of two large airport terminal projects-a massive $1.2
billion project in Las Vegas and a $316 million project in Sacramento….For the 12
months ending January 2009, total construction was down 19%,” with nonresidential
building, -9%; building, -40%; and nonbuilding construction, +5%.
The downturn in retail construction seems likely to continue. “Lowe’s said it is
curtailing new-store expansion in light of the weak economy,” theWall
Street Journalreported on Saturday. “It now expects to open 60
to 70 stores this year, compared with a forecast of up to 85 new stores that
the…chain outlined in September. It opened 115 stores last year.” On January
27, theJournalreported, “Home Depot said it is
shuttering its 34 Home Expo Design Centers….Home Depot plans to open 12 of its
core home-improvement stores [in 2009], down from the 30 to 40 stores it
previously expected.”
On January 29,USA Todayreported, “Starbucks will close…about 200 [stores] in the U.S. These closings
are in addition to the 600 [announced last fall]. Starbucks will open 140 stores-60
fewer than its previous target of 200.” Chico’s FAS announced it would close 25
stores; Ruby Tuesday said it would close 40 restaurants early in 2009 and 30
more over the next several years. In contrast, Hennes & Mauritz “said it
plans to open 225 stores this year, including its first branch in Beijing,” theJournalreported last month.
Power
construction, which grew 33% in
2008, according to a February 2 report by the Census Bureau, may be in for
slower growth this year, despite $11 billion in the stimulus bill for “smart
grid” construction and incentives for wind and other alternative power. In a
presentation to the Construction Users Roundtable on February 11, Mark Agnew,
director of financial analysis for Edison Electric Institute, estimated that capital
expenditures of U.S. shareholder-owned electric utilities would decline 10% or
more in 2009, although the longer-term trend is still upward.
“American
Electric Power Co. said…it will cut capital spending by about $1.2 billion this
year, versus last year, to $2.5 billion,” theJournalreported Jan. 30. Florida Power & Light “said it will cut capital spending
$400 million this year….David Ratcliffe, Southern’s chief executive, said he
plans to trim $200 million from capital spending, about 5%, mostly by delaying
upgrades that aren’t critically needed….In Washington state, Avista Corp….is
delaying a wind project until 2013.”
One
category that still seems positive is manufacturing
construction, which led all types last year with a 51% jump over 2007,
Census reported Feb. 2. Manufacturing construction starts in January rose “25%,
helped by the start of a $500 million steel plant upgrade in Pennsylvania,” MHC
reported on Thursday. Intel Corp. announced Feb. 10 that it would spend $7
billion over the next two years, though mainly on equipment, to upgrade its
U.S. plants.
PPI, CPI Show Mixed Patterns; McGraw-Hill New Starts Fall
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