According to a monthly survey conducted for the Conference Board and the Business Council, CEO confidence is currently the highest it has ever been, or at least dates back to the start of attempts to measure it in 1976. tempered by limitations resulting from: (a) downtime necessitated by shortages of critical parts; (b) rapid increases in the prices of commodities and other inputs; c) difficulty in recruiting qualified workers to meet manpower needs; and (d) bottlenecks in transport delivery systems.
The business community has expressed understanding that two ways to solve their critical problems are to increase wages and increase capital spending. The additional investment may initially consist of the means to continue riding the wave of technological advancement that has accelerated during the health crisis of the year and the past quarter. In many cases, however, demands for new equipment and more behind-the-scenes support services will result in larger “footprints”, which is just another way of saying construction.
Consumers, while more optimistic than usual, don’t feel as excited as CEOs. Their ardor was slowed down by the disappearance of government income support measures and inflation which started to rise again, driven by the price of gasoline.
In the above context, here are some other “nuggets” to take from the most recent data releases from the public and private sectors.
(1) The United States’ merchandise trade deficit (i.e. the deficit in trade in “goods” over the surplus in trade in “services”), which has exploded in recent times, decreased slightly in April. It was still under $ 1 trillion, but at an annualized $ 1.040 trillion, it was lower than March’s $ 1.15 trillion. Such a large negative position, accompanied by “net” foreign currency outflows out of the country into the “current account” of the balance of payments, puts pressure on interest rates to attract money to the United States via the Counterbalance “capital account”. Or there is another solution, a depreciation of the value of the US dollar.
(2) The Canadian dollar will now buy 82 cents US Expressed as the inverted relationship, a US dollar can now buy 122 cents Canadian. A year ago, a Canadian dollar could only acquire 74 US cents. Or, conversely, a US dollar could buy 135 Canadian cents. Has the “loonie” gained in value or has the “greenback” fallen? Perhaps there are a little more of the former than of the latter. The strength of Canada’s resource sector has been recognized and appreciated for over a decade. Chart 1 shows how firmly the price of oil is on the trail of return.
Chart 1: Daily spot price of West Texas Intermediate (WTI) oil, Cushing terminal, Oklahoma
Data sources: US Energy Administration / Federal Reserve Bank of St. Louis (FRED).
(3) Reports are circulating in the media about some current decline in the costs of building materials. Unfortunately, the latest “official” results of the Producer Price Index (PPI) series, calculated and released by the Bureau of Labor Statistics (BLS), are not up to date or up to date. On the contrary, they are for a month ago. The May PPI input cost results were as follows: Softwood lumber, + 154.3% year over year and + 20.6% month over month; plywood, + 98.4% a / a and + 14.0% m / m; particle board and fiberboard, + 121.5% y / y and + 11.4% m / m; scrap and scrap, + 76.6% y / y and + 5.0% m / m; hot-rolled steel bars, sheets and profiles, + 29.0% y / y and + 0.7% m / m; forms of aluminum rolling mills, + 28.6% y / y and + 2.7% m / m; copper wires and cables, + 38.8% y / y and + 6.8% m / m; and asphalt, + 62.3%, but -13.8% m / m.
(4) In order to assess the relative levels of construction activity in large urban centers, consultancy firm Rider, Levett, Bucknall publishes a “crane count” on a quarterly basis. The US cities with the most cranes dominating their skylines in the first quarter of 2021 were Washington, DC, 45; Seattle, 43; Los Angeles, 41; and Denver, 22. Boston, Chicago and New York were back in the peloton with 13, 12 and 10 cranes respectively. But now something astonishing. Let’s take a small step north of the border. Toronto’s crane count in the first quarter of this year was 208, more than four times the leader of the US city.
(5) Toronto’s high number of cranes is related to the strength of high-rise residential construction that has long been prevalent in the city. Until May, Toronto leads all Canadian cities in the annual cumulative number of housing starts expressed in units. TO’s 15,083 units exceed Montreal’s 13,997 and Vancouver’s 11,503. For the three cities, multis largely exceed singles, representing 80 to 90% of the total. On a percentage change basis, Toronto’s + 4% for “total” and -1% for “multis” do not correspond to Montreal’s + 77% for “total” and “multis” and +48 % of Vancouver for “total” and + 55% for “multis”. In Alberta, and arguably helped by the recovery in oil prices as shown in Chart 1, Calgary (home to the headquarters of many oil and gas companies) outperforms Edmonton (the provincial capital). Calgary’s year-on-year housing starts are 5,702 units and + 62% year-on-year; Edmonton, 4,800 units and + 9%.
(6) It is difficult to understand the degree of explosive growth in housing starts BOOM in Canada so far this year. The seasonally adjusted and annualized monthly average number (PHI) of the total number of housing starts in Canada since the start of the year in 2021 was 291,000 units. Until May of last year, the comparable figure was 196,000 units. The increase was + 48%.
(7) I thought it would be fun to end with a comparison of the stock price performance of the major suppliers of coronavirus vaccines. Year-over-year, Pfizer Inc.’s (PFE) share price is + 27.1%; Johnson & Johnson (JNJ), + 17.1%; and Astra Zeneca (AZN), + 14.0%. But the winner is Moderna Inc. (MRNA), + 263.6%.
Alex Carrick is Chief Economist for ConstructConnect. He has given presentations across North America on the outlook for construction in the United States, Canada and around the world. Mr. Carrick has been with the company since 1985. Links to his many articles are posted on Twitter. @ConstructConnx, which has 50,000 subscribers.