Wright Express Corporation, a leading global provider of value-based business payment processing and information management solutions, in collaboration with IHS, the leading global source of information and analytics, today released results of its Wright Express Construction Fuel Consumption Index (FCI), which indicated a decrease of 2.2% in August versus its level the previous year.
The Wright Express Construction FCI measures national fuel consumption statistics for the construction industry, which provides an accurate and up-to-date indication of construction activity in the United States.
“The results of the August 2012 Fuel Consumption Index reflect the continued struggle for growth in the U.S. construction industry,” said Rick Pomerleau, vice president, corporate development at Wright Express. “While in recent months we saw somewhat consistent FCI growth year-over-year and nearly flat growth in July, the decline in August serves as a reminder that the economy has yet to stabilize.”
Wright Express worked with IHS to capture and analyze transaction data from its closed loop network of more than 180,000 fuel and vehicle maintenance locations, including over 90 percent of the domestic retail fuel locations and 45,000 vehicle maintenance locations. With this data, the Wright Express Construction FCI can be used to identify emerging trends within the construction industry and the national economy.
The indicators were tested at monthly, quarterly, and annual frequencies, with the greatest insights produced using the year-over-year percent change of the monthly data. For August 2012, the Wright Express Construction FCI reported that fuel consumption by U.S. construction companies decreased by 2.2% versus August 2011 and also declined by 2.1% versus the previous month.
The Wright Express Construction FCI, which is available monthly in advance of the U.S. Census Bureau figures on construction spending, is available at www.wrightexpress.com/fci.
Last month’s Wright Express Construction FCI corresponded with decreased construction spending levels evident in most of the government’s subsequent construction data releases. Construction spending excluding improvements – a good measure of activity – decreased by 0.2% in July; however, one positive segment was private residential construction, which rose by 1.6%. August housing permit statistics mirrored the declining Fuel Consumption Index by falling 1.0% in August to an annual rate of 803,000. Housing starts did climb to their second highest level since October 2008 with an increase of 2.3% in August. Total construction put-in-place decreased by 0.9% in July.
According to the IHS analysis, the decline for the Wright Express Construction FCI in August coincides with difficulties for the U.S. construction industry, but recent housing statistics suggest modest improvement. Existing home sales jumped 7.8% in August, which is the best figure since May 2010. Although there were some larger increases in 2009 and 2010, those were boosted by tax credits, while this month’s increase was driven by economic fundamentals including an improving economy, low interest rates, and a drop in the cancellation rate.
Normal economic conditions are still at least a couple of years away even though the housing market is expected to see some improvement this year. The rise of home prices in recent months is due to a rising demand by investors, low interest rates, and a drop in the proportion of distressed sales. Any gain in prices is good news because the price gains reduce the number of homeowners with “underwater” mortgages. The current economic outlook, however, is for a modest recovery that lasts three to four years, not the sharp upswing that characterizes most housing recoveries.
The Wright Express Construction FCI for August 2012 is available at www.wrightexpress.com/fci.