Capitol Update – 10/18/2021
Which business costs will increase in 2022?
Business costs such as insurance, health care and energy will rise next year, according to Kiplinger forecasts. In addition, some interest rates will inch up amid growth in GDP, consumer spending and wages, the forecasters predict. Full Story: Kiplinger
Brief highway law extension leaves contractors hanging
The nation’s 2015 highway law has been extended by Congress again, but time runs out at the end of this month. As a result, contractors are disappointed and increasingly anxious that the five-year extension forming part of the disputed infrastructure bill in Congress may not pass. Full Story: Roll Call
PPI for final demand advances 0.5% in September; goods rise 1.3%, services increase 0.2%
The Producer Price Index for final demand increased 0.5 percent in September, as prices for final demand goods rose 1.3 percent and the index for final demand services moved up 0.2 percent. The final demand index rose 8.6 percent for the 12 months ended in September.
2020s expected to yield 35% higher construction output
Global construction output this decade is on pace to outstrip that of the preceding decade by 35%, according to a report by Oxford Economics and Marsh McLennan companies Marsh and Guy Carpenter. The greatest share of that growth will come in China, India, the US and Indonesia, with construction as a whole posting gains that will top those in manufacturing and services. Full Story: Global Construction Review (UK)
CPI for all items rises 0.4% in September; food, shelter among indexes rising
In September, the Consumer Price Index for All Urban Consumers rose 0.4 percent on a seasonally adjusted basis; rising 5.4 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy rose 0.2 percent in September (SA); up 4.0 percent over the year (NSA).
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L.A. NBA stadium comes with big price tag, goals
AECOM Hunt and Turner Construction broke ground last month on what will be the third most expensive sports venue project in the US. The NBA’s Los Angeles Clippers franchise has a plethora of sustainability goals for the $2 billion, 18,000-seat venue, including LEED Platinum certification, natural ventilation and 100% embodied carbon concrete. Full Story: Construction Dive
Biden halts work on border wall sections
Steel worth tens of millions of dollars will remain idle after President Joe Biden canceled border wall construction in the sectors of Laredo, Texas, and the Rio Grande Valley. In total, about $2 billion has been wasted so far with the president’s orders to halt wall construction, according to Senate Homeland Security subcommittee ranking member James Lankford, R-Okla. Full Story: WCTI-TV (New Bern, N.C.)
Crane count down in many N. American cities
The total of fixed construction cranes counted in North American cities declined by 4.5% between the first and third quarters, according to the Crane Count by Rider Levett Bucknall. Fourteen cities were included in the count, and the numbers were down in each with the exceptions of Los Angeles, San Francisco and Toronto, where the totals were up. Full Story: Construction Dive
Construction employment up by 22K in Sept.
Gains across all residential and nonresidential sectors buoyed construction employment in September with 22,000 added jobs for the month, according to the Bureau of Labor Statistics. That left the industry’s jobless rate at 4.5%, improving significantly from 7.1% a year before.
Full Story: Engineering News-Record (tiered subscription model)
California Energy Price Data for September 2021
Below are the monthly updates from the most current September 2021 fuel price data (GasBuddy.com) and July 2021 electricity and natural gas price data (US Energy Information Administration). To view additional data and analysis related to the California economy visit our website at www.centerforjobs.org/ca.
The sustained escalation in both energy prices and average monthly costs reinforces a reminder that rising costs of living and rising costs of doing business in California currently remain a part of the state’s economic future. These increasingly unaffordable cost additions are not the result of the state’s climate change program; they are the outcome of the way the state has chosen to pursue it. While the nation’s greenhouse emission reductions have largely matched those in California, and in some years dropped at a greater rate, the national reductions have been achieved at far lower costs, especially to lower and middle income households.
The data presented below as usual provides comparative energy cost information with a one to three month lag, and consequently does not yet incorporate recent activity likely leading to even higher costs:
- Oil and natural gas prices rose sharply after OPEC rejected President Biden’s request to increase production to offset drops in US production and exports. Through October 5, crude oil futures rose 63% since the beginning of the year to just below $80 a barrel. Natural gas futures rose 156%. These price rises will flow through the data tracked in these reports over the coming months as consumers and employers use energy directly especially for heating in the upcoming winter months.
- These higher costs will also move into the price of thousands of products that rely on these supplies as a feedstock or input at some point in the production and distribution chain. The current production restrictions are occurring just as demand is increasing due to the normal period of stockpiling in anticipation of winter demands and as overall demand is increasing in line with global economic recovery. At a minimum, these supply and cost pressures will fuel the rising inflation experienced in recent months. At worst, they will present yet another but far more substantial supply disruption affecting the future path of the recovery.
- This latter effect is already being seen elsewhere. In Europe, coal and natural gas shortages combined with drops in renewables output have produced power shortages, spiking energy prices, shifts to oil and more expensive LNG imports, and the threat of power company bankruptcies. In China, climate change program limitations on coal production and energy efficiency goals again combined with drops in renewables output have also produced widespread power shortages, leading to a renewed wave of production shutdowns that are contributing to the supply chain blockages already affecting production and product availability in the US. Faced with these shortages, US companies have been forced to shut down their own production, actions that will limit potential recovery job and income gains in the coming months, and in other instances allocated limited component supplies to higher price and higher margin products in order to survive economically in this period, actions that will contribute further to rising inflation.
- The shortages in China are also affecting future costs for renewables in the state and the US as well. While California has generated some “clean energy” jobs under its climate policies, the bulk has been temporary jobs related to construction and installation activities. Manufacturing and production jobs related to materials and equipment instead are located elsewhere, with China containing about 70% of global solar panel capacity. Rising material and shipping costs are affecting the economics of an increasing number of wind projects. Production shut-downs in China are creating shortfalls in many critical components required to maintain solar panel supplies.
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Mark Smith
Advocate
California Builders Alliance
5370 Elvas Avenue ǀ Sacramento, CA 95819
Cell: 916.335.5072
Email: mark.smith@calbuilders.org