Construction MMI: U.S. construction spending rises 3.7% year over year

The Construction Monthly Metals Index (MMI) rose 4.9% for this month’s index value, as U.S. construction spending showed recent gains.
December 2020 Construction MMI chart
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U.S. construction spending

U.S. construction spending in October 2020 reached a seasonally adjusted annual rate of $1,438.50 billion, the Census Bureau reported.
The October rate marked a 1.3% increase compared with the previous month.
Furthermore, the October spending rate marked a 3.7% year-over-year increase.
Meanwhile, spending during the first 10 months of this year totaled $1,189.6 billion, or up 4.3% year over year.
Spending on private construction reached a seasonally adjusted annual rate of $1,093.7 billion, or up 1.4% from the previous month. Under the umbrella of private construction, residential construction reached a rate of $637.1 billion, up 2.9% from the previous month. The nonresidential construction rate dropped 0.7% to $456.6 billion in October.
Meanwhile, the estimated seasonally adjusted annual rate of public construction spending reached $344.8 billion, up 1.0% from the previous month. Under public construction, educational construction reached a rate of $86.4 billion, or up 1.1%. Highway construction rose 1.6% to $92.6 billion.

ABI: billings decline slows

In addition to rising construction spending, the Architecture Billings Index (ABI), released monthly by the American Institute of Architects, posted an October index reading of 47.5, up from 47.0 the previous month.
Any reading less than 50 indicates billings decline. Meanwhile, the design contracts index ticked up from 48.9 the previous month to 51.7 in October.
Business conditions in October “moved slowly towards recovery,” the ABI report notes.
“In addition, indicators of future work strengthened, with inquiries into new projects climbing to their highest level in nearly a year, and the value of new design contracts growing for the first time since February,” the ABI report continued. “This means that not only are clients talking to firms about potential projects; they’re signing on the dotted line to start those projects. Both of these indicators are encouraging signs that business is slowly, but steadily, returning at many firms.”
Of interest to metals buyers, this month’s ABI survey asked architecture firms whether they’ve seen changes in prices or availability for construction materials.
The results reveal challenging conditions for architecture firms.
Six of 10 respondents said they had seen some degree of higher prices and more limited availability.
Furthermore, 32% of those respondents indicated they had seen significantly higher prices or limited availability, while 28% said the changes have been modest.
Going forward, as the economy continues to recover and the nation and world remain hopeful about vaccines’ ability to begin to control the spread of the coronavirus pandemic, metals prices could continue to rise. Furthermore, there remains the significant wild card that is a potential U.S. infrastructure bill, which would serve as a massive boost for metals demand.

Pending home sales down in October

In the U.S. housing market, the National Association of Realtors reported pending home sales in October dropped 1.1% from the previous month.
However, each of the four major U.S. regions saw year-over-year gains in pending home sales transactions.
“Pending home transactions saw a small drop off from the prior month but still easily outperformed last year’s numbers for October,” said Lawrence Yun, NAR’s chief economist. “The housing market is still hot, but we may be starting to see rising home prices hurting affordability.”

Actual metals prices and trends

Amid increased construction spending in China — powered by government stimulus measures —  the Chinese rebar price rose 10.7% month over month to $613.70 per metric ton as of Dec. 1. Meanwhile, the Chinese H-beam steel price rose 1.7% to $566.61 per metric ton.
The U.S. shredded scrap steel price held flat at $290 per short ton.
The European commercial 1050 aluminum sheet price rose 5.3% to $2,720.58 per metric ton.
Chinese iron ore PB fines gained 1.7% to $79.75 per dry metric ton.
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