Construction MMI: Construction spending gains, pace of ABI growth slows

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The Construction Monthly Metals Index (MMI) rose by 3.3% for this month’s reading, as construction spending picked up in November.

January 2022 Construction MMI chart

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U.S. construction spending reached a seasonally adjusted annual rate of $1,625.9 billion in November, or up 0.4% from October, the Census Bureau reported.

Furthermore, the November rate marked a 9.3% year-over-year increase.

Meanwhile, through the first 11 months of 2021, construction spending reached $1,463.2 billion, or up 7.9% year over year.

Spending on private construction reached a rate of $1,273.6 billion in November, or up 0.6% from October. Public construction spending reached $353.2 billion, or down 0.2%.

“Private nonresidential spending appears to be on a solid upswing, with five consecutive months of growth, but public outlays for construction remain erratic,” said Ken Simonson, chief economist for the Associated General Contractors of America, in a release. “The public side isn’t likely to post steady gains until funds from the new infrastructure law become available and turn into actual projects.”

ABI growth slows

The Architecture Billings Index, a leading indicator of nonresidential construction activity in the U.S., reached 51.0 for November. Any reading greater than 50 indicates billings growth.

However, growth slowed from the previous month, when the ABI reached 54.3.

Meanwhile, the design contracts index reached 55.8 in November, down from 58.0 the previous month.

“An ABI score of 51.0 for the month still means that the majority of architecture firms saw billings growth at their firms this month, but that fewer are seeing growth now than earlier this year,” the November 2021 ABI report reads. “However, a growth rate like what was experienced this past spring and summer is difficult to maintain for long, and firm billings have now shifted closer to the pace of growth seen in previous recovery periods. In addition, firms continue to report a very strong amount of work in the pipeline, with inquiries and the value of new design contracts remaining near all-time high levels.”

By region, the Midwest led the way with a reading of 57.6. Trailing the Midwest were the South (53.7), West (50.9) and Northeast (45.5).

This month’s ABI survey asked architecture firms about their biggest concerns for 2022. Among the respondents, 27% indicated profitability is one of their top three concerns. Meanwhile, 19% listed filling open staff positions. Furthermore, 16% indicated retaining current staff is among their chief concerns in the year ahead.

Lumber prices resurgent

Speaking of construction spending, for those in the residential construction sector — or those in the process of building a new home for themselves — skyrocketing lumber prices last year proved a prohibitive cost pressure.

Eventually, lumber prices receded from historic highs. However, prices hace once again started to climb in recent months.

According to the National Association of Home Builders, lumber prices have tripled over the last four months. As a result, the increase has added approximately $18,600 to the price of a new home, the NAHB reported.

The NAHB said the most recent surge comes as a result of supply chain disruptions, doubling of tariffs on Canadian lumber and an “unusually strong” wildfire season in the western U.S. and British Columbia.

Construction jobs

Much of the economic discourse across multiple sectors over the last couple of years has focused on an inability to hire and retain labor.

The issue has impacted the construction sector, among others. However, according to the Associated General Contractors of America, construction employment increased in two of three U.S. metro areas from November 2020 to November 2021.

Construction employment rose by 31,000 in November, the Bureau of Labor Statistics reported. Even so, construction employment remains down by 115,000 from the February 2020 level.

Actual metals prices and trends

The Chinese rebar price fell 0.86% month over month to $744 per metric ton as of Jan. 1. Meanwhile, the Chinese H-beam steel price increased 0.19% to $744 per metric ton.

Chinese aluminum bar rose 8.7% to $3,376 per metric ton.

U.S. shredded scrap steel held flat at $531 per short ton.

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