[NEWS TRACKER] Virus Crisis and Recession Putting Construction Recovery at Significant Risk

The COVID-19 pandemic has wreaked havoc on the nation's building markets during the first half of 2020; plus more construction industry news on the August 6, 2020, edition of Construction News Tracker.

Construction News Tracker is presented by Caterpiller and produced by ForConstructionPros.com.


Economic numbers continue to be mixed during pandemic

The COVID-19 pandemic has wreaked havoc on the nation's building markets during the first half of 2020. Dodge Data and Analytics reports that while the industry looked pretty decent in January and February it fell apart in March as the recession really kicked in. Commercial and multifamily starts dropped 21% as a result. This group is comprised of stores, hotels, office buildings, warehouses, commercial garages and multifamily housing.

The top 20 metropolitan areas of the nation registered similar reductions led by New York City, Washington D.C. and Dallas. Dodge Chief Economist Richard Branch says the virus crisis and recession is likely to put any recovery at significant risk and could undermine construction's ability to grow.

The number of laid off workers seeking jobless benefits rose again in the U.S. for the first time since March in the latest unemployment report from the Labor Department. The agency reports that more than 1.4 million Americans sought jobless assistance amid the 19th consecutive week of requests over a million.

That presents an even worse picture of job loss from construction as AGC reports employment rose in 31 states from May into June but skipped in 18 others. New York state added the most jobs in that time frame while Massachusetts recorded the largest percentage increase in jobs. Louisiana lost the most jobs.

Associated Builders and Contractors is reporting that its Construction Backlog Indicator rose to 8.1 months in June, down about 8% from June of 2019. Every state except the middle ones registered a backlog increase in June. Construction costs have declined slightly for the first time in a decade as a result of the virus pandemic.

The Turner Building Cost Index, which measures the nonresidential building construction market, notched a 1.1% reduction in the second quarter of the year. ABC Chief Economist Anirban Basu says contractor competition has increased dramatically as firms work to secure backlog and the average contractor is more concerned about demand for services than any other consideration.

Caterpillar revenue drops big in Q2

Caterpillar is reporting its second quarter financial results, and they're not good. Revenue dropped more than 40% as the market for big construction equipment dropped out as customer demand fell 22%.. Caterpillar shares fell 3.6% as a result. Revenue fell globally across Caterpillar's three major segments. Sales was off by:

  • 37% for construction equipment
  • 35% for mining equipment
  • 24% for energy and transportation machines

Machinery sales to dealers dropped by a third globally. Caterpillar officials say they are poised to weather the economic storm with plenty of cash reserves and anticipated improvements in the near future.

Road building struggles continue in many states

A mixed bag when it comes to supporting the nation's roadways in the latest survey of Americans opinions' in highway taxes. The MINETA Transportation Institute at San Jose State University conducted its 11th annual national survey by asking participants if they would support a 10 cent per gallon federal gas tax increase. Seventy-five percent said they would support a raise if the funds were used for dedicated maintenance projects. But only 44% said they were in favor if the money went to maintain and improve the highway system.

Interesting that only 3% of the survey takers knew the Congress has not raised the federal gas tax since 1993. Only half those in the MINETA survey said they were in favor of a user type fee. And all said electric vehicle users should be taxed less than those who drive conventional vehicles.

The New York City Public Transportation Agency is preparing drastic measures to address a $16 billion shortfall. Brought on by the coronavirus, the staggering budget loss through 2024 has officials saying its impossible to recover from it without federal help. The MTA is looking to reduce service, slash its workforce, scrap planned infrastructure improvements, raise tolls and add to its already massive debt load.

With a  degree of trepidation the Ilinois DOT has unveiled a $3.1 billion transportation plan for this year. Funded by a new higher gasoline tax enacted a year ago, the IDOT officials say that they are adopting a $21 billion, six-year program to cover their infrastructure needs. Illinois jacked up its motor fuel tax from 18 cents per gallon to 38 cents per gallon a year ago, and that is tied to a constantly rising level annually to 38.7 cents per gallon this year. The increase has permitted the state to begin major highway renovation projects.

Arizona experiments with sidewalks that can cool temperatures

It's being called the cooling effect, and the idea is to cool asphalt surfaces in desert communities. Phoenix has begun a pilot program in the desert city where daytime temperatures can reach 120 degrees. Street maintenance crews apply a special material to sidewalks that contain color additives in grey that reflects back the sunlight rather than retain heat. Officials have found that the application has resulted in an 18 degree temperature difference and produces a calming effect.

In closing, a man can fail many times, but he isn't a failure until he gives up.

This is Construction News Tracker looking over the industry that makes the world a better place, presented by Caterpillar and produced by ForConstructionPros.com.

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