Construction Economic News

Challenging economic conditions in China will have ramifications for U.S. prices, and certainly within the construction industry. In its latest GDP data release, China’s economy grew at an annualized rate of 6.3%, marking one of the slowest pre-COVID-19 growth readings since at least the 1990s.

On July 26, the Federal Reserve increased the benchmark Fed Funds Rate (FFR) to 5.25%, marking the 11th consecutive time that the Fed has raised rates since early 2022. Never in history has the Fed raised the FFR this aggressively. As the Fed increases the FFR, it indirectly raises the cost of borrowing for public and private borrowers. This benchmark, which influences the rate of all other U.S. debt products, is presently at its highest level in more than 22 years.

The Construction Economics Brief, produced by ConstructConnect’s economics team, is a monthly video series whose aim is to provide the latest and most pertinent economic information to construction industry leaders in a concise video format.

U.S. consumer prices increased by 3.0% in the year period ending June 30, 2023, according to the Bureau of Labor Statistics. This marked the slowest recorded rate of inflation in over two years. At that time, prices were only just beginning their historic rise caused by a combination of surging demand, crippled supply chains, and hampered production.

ConstructConnect’s Expansion Index data through the end of June 2023 reported accelerating contemplated spending growth in the U.S. and Canada at the rate of 16% and 5%, respectively. Rising contemplated spending in the provinces of Alberta, Nova Scotia, and Ontario offset contracting results in Newfoundland and Quebec. Canada’s overall reading was slowed by a substantially lower reading for Quebec from the month prior.

ConstructConnect's Project Stress Index is a new resource that tracks changes in the level of projects that are delayed, placed on hold, or abandoned based on weekly construction activity data.

The recent history of global energy price movements is unprecedented. Not since at least World War II have energy firms, or their customers, experienced the severity and frequency of price shocks that have occurred as a result of COVID-19 and, more recently, the war in Ukraine.

The economics team at ConstructConnect frequently emphasizes the importance that geography and market verticals have on the future prospects of any construction firm. Freely available data from our Expansion Index makes it possible for any construction business owner with a computer to view for themselves the expected divergence in anticipated construction spending by metropolitan statistical area (MSA) and market vertical. ConstructConnect Insight allows users to see not only historical construction spending by MSA and vertical, but forecast expectations as well.

After surging to notable peaks of $1,400 per contract in May 2021 and a similarly impressive $1,300 in February 2022, the continuous contract prices for Random Length Lumber are currently in search of a market floor. As of May 15, 2023, prices had plummeted to $344, marking a three-year low that was only slightly surpassed by the knee-jerk collapse in prices during the initial weeks of the COVID-19 pandemic. Prior to the disruption caused by the pandemic, lumber prices had traded within a narrow range of $390 to $440 per contract.

When it comes to determining the interest rate that a company must pay to borrow capital, everything is relative. The interest rate that the safest, or least risky, borrowers are charged to borrow is often called the risk-free rate.