Construction MMI: February 2021 construction spending dips, pending home sales also down

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The Construction Monthly Metals Index (MMI) ticked up 1.0% for this month’s reading, as US construction spending dipped in February.

April 2021 Construction MMI chart

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US construction spending

Construction spending in February reached a seasonally adjusted annual rate of $1,516.9 billion, or 0.8% below the revised January estimate of $1,529.0 billion, the Census Bureau reported.

Meanwhile, the February rate marked an increase of 5.3% year over year.

Furthermore, spending the first two months of 2021 totaled $213.2 billion, or up 4.9% year over year.

In the private sector, spending reached a rate of $1,165.7 billion, or down 0.5% from January. Under private construction, residential construction fell 0.2% to $717.9 billion. Nonresidential construction spending fell 1.0% to $447.8 billion.

Meanwhile, public construction spending reached a rate of $351.2 billion, or down 1.7% from January. Educational construction fell 3.2% to $86.9 billion. Highway construction reached $102.3 billion, or down 0.6% from January.

Biden’s jobs plan could have major impact on construction sector

President Joe Biden’s American Jobs Plan — the details of which he unveiled last week — aims to revamp and modernize US infrastructure, from roads and airports to broadband and housing.

On the housing front, the plan aims to invest in production of more affordable housing.

“The President’s plan invests $213 billion to produce, preserve, and retrofit more than two million affordable and sustainable places to live,” the White House said in a release. “It pairs this investment with an innovative new approach to eliminate state and local exclusionary zoning laws, which drive up the cost of construction and keep families from moving to neighborhoods with more opportunities for them and their kids.”

The plan calls for the construction and rehabilitation of 500,000 homes for low- and middle-income homebuyers.

The president’s plan aims to ramp up construction spending targeting the country’s aging infrastructure, from roads to bridges. The plan includes $115 billion to modernize bridges, highways, roads, and main streets.

Contractors welcome Biden plan, criticize labor proposals

The Associated General Contractors of America called the infrastructure improvements “much-needed” but panned other aspects of the proposal.

“We greet the President’s new infrastructure proposal with mixed emotions,” AGCA CEO Stephen E. Sandherr. “On one hand, the President is right to focus on rebuilding a broad range of aging and overburdened infrastructure and modernizing buildings. These investments will create a significant number of new construction career opportunities that traditionally pay well above jobs in other industries. Unfortunately, the President seeks to saddle these new investments with a host of labor and regulatory measures that will hurt workers and offset many of the economic benefits of these new infrastructure investments.”

The Associated Builders and Contractors offered a similar take on the plan’s proposals related to labor and corporate taxation.

“While policy details are still emerging and the infrastructure plan will need to go through Congress, it is disappointing to see the Biden administration support the use of divisive government-mandated project labor agreement schemes on taxpayer-funded construction projects,” ABC President and CEO Michael Bellaman said. “Government-mandated PLAs exclude more than 87% of the U.S. construction workforce from rebuilding their communities and benefitting from well-paying middle-class jobs created by taxpayer investments in infrastructure.”

Pending home sales cool in February

According to the National Association of Realtors, pending home sales fell by 10.6% in February.

The drop marked the second consecutive month of decline for pending home sales.

“The demand for a home purchase is widespread, multiple offers are prevalent, and days-on-market are swift but contracts are not clicking due to record-low inventory,” said Lawrence Yun, NAR’s chief economist.

“Only the upper-end market is experiencing more activity because of reasonable supply,” he continued. “Demand, interestingly, does not yet appear to be impacted by recent modest rises in mortgage rates.”

Construction sector adds 110,000 jobs

The US construction sector added 110,000 jobs in March, the Bureau of Labor Statistics reported.

“Employment growth in the industry was widespread in March, with gains of 65,000 in specialty trade contractors, 27,000 in heavy and civil engineering construction, and 18,000 in construction of buildings,” the BLS reported.

However, construction employment is still down by 182,000 jobs from its February 2020 level.

Furthermore, construction unemployment remains “elevated,” according to the Associated General Contractors of America.

“The rebound in March is certainly good news, but contractors face growing challenges that imperil further growth in nonresidential employment,” said Ken Simonson, chief economist for the Associated General Contractors of America.

Job gains in Q1 2021 slowed compared to H2 2020, he added.

Actual metals prices and trends

While construction spending and pending home sales fell, materials prices have mostly continue to rise.

The Chinese rebar price rose by 4.3% month over month to $746 per metric ton as of April 1. Meanwhile, Chinese H-beam steel fell by 1.0% to $569 per metric ton.

European commercial 1050 aluminum sheet rose by 1.2% to $3,238 per metric ton. Furthermore, US shredded scrap steel rose by 7.5% to $443 per short ton.

Lastly, Chinese 62% iron ore PB fines fell by 1.2% to $80.06 per dry metric ton.

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