Construction News Tracker is presented by Caterpillar and produced by ForConstructionPros.com.
Economic outlook is gloomy
Dodge Data is reporting the second quarter of the financial year for the U.S. will be much worse than the first quarter outcome. While the first quarter GDP came in at a loss of 4.8% consumer spending has dropped 7.8% — the worst since 1980. Dodge believes the second quarter will be even more dour dropping by 24% on an annualized basis, and this may become an overly optimistic projection.
Dodge April Index dropped by 6% to 135.9 as the commercial component lost 7.6% while the institutional component fell by 3.2% as the virus left a significant impact on the economy.
Associated Builders and Contractors (ABC) Chief Economist Anirban Basu reports he sees the economy for construction facing a steep decline occurring in three phases. In phase one, says Basu, social distancing and other CDC restrictions on the industry will continue while certain locales maintain construction shutdown orders. Phase two will be the downturn in economic recovery, which Basu says will bring about the deepest recession since that in 2008-09.
In phase three the ABC economist predicts construction activity will lag behind the broader economy by 12 to 18 months as empty storefronts and office suites will produce a malaise in construction that could last for years.
The latest Construction Backlog Indicator is showing 7.7 to 8.2 months while the latest Construction Confidence Index measured among ABC members in late March revealed contractors expectations for sales, profit margins and staffing levels fell below the 50 point median mark for the first time in history.
Bleak new figures from the Department of Labor continue to show a tremendous increase in the number of workers filing unemployment claims. The latest adding 3.8 million and reaching 30 million in the six weeks since the virus was first discovered. The April unemployment numbers have the nation at 14.7% without jobs, the highest since the Great Depression of the 1930’s.
Caterpillar sales suffer
Caterpillar has reported out its first quarter sales and revenue numbers, and they show a loss of $10.6 billion, or 21%, from the same numbers in 2019. As of mid April globally and across the three primary segments of the company Cat says 75% of its facilities continued to operate. The company said continued operations during the Covid-19 pandemic will be impacted by the ongoing situation worldwide.
Cement consumption to be down
Another barometer of the health of construction is one from the Chief Economist of Portland Cement Association Ed Sullivan. His is a long-term outlook for the industry, and Sullivan's latest is grim to say the least. Sullivan says the nation is in a deep recession and will not soon emerge from it.
Cement consumption is down 30% currently, and Sullivan says it will drop 31% in May and June, although Midwest and mountain states are not expected to be hit as hard. This has always been a good indicator of what to expect in overall construction activity so the next few months are expected to be challenging.
Loss of gas taxes hurting roads
California is slated to lose $370 million in gas tax loss due to its stay at home order during the virus crisis. Researchers claim road miles have dropped 75% since the start of the pandemic in the golden state. Across the country in New Jersey the loss of fuel tax revenue could spur a new jump in the state gas tax under a law passed in 2016.
North Carolina has been hit with a $300 million budget shortfall as a result of the pandemic and is cutting back on some road projects. Add to the list Mississippi, Missouri, Washington and others facing severe limitations in the future as motorists have stopped driving, and stopped buying gasoline and diesel fuels, resulting in these budget pitfalls for states.
Floods to be kept at bay in 2020
The flood outlook for the nation's midsection is expected to see a great improvement this year as storm predictions call for lesser amounts of rainfall. The National Weather Service forecast for 23 states calls for a declined risk this year as opposed to 2019 when $20 billion in damage was caused by flooding. Floodplains are being gradually changed as residents and officials recognize the need to create more parks, marshes and forests on land surrendered in recent years to flooding.
Even the U.S. Army Corps of Engineers, which has built hundreds of levees and dams, sees the need to change the way we think about landscape in threatened regions. As one official put it, we need to shape our communities around our rivers rather than shape our rivers around our communities.
In closing, the largest room in the world is the room for improvement.
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