Charts for Steel Framing Industry Association webinar: "2014 Economic Forecast: Cold-Formed Steel and Construction" presented Nov 19, 2013

1. SFIA Webinar
November 19, 2013

2. 2014 Economic Forecast:
Cold-Formed Steel and
Construction
Presented by: Bernard M. Markstein
Reed U.S. Chief Economist
Greenbuild 2010

3. 2014 Economic Forecast
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4. 2014 Economic Forecast
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Greenbuild 2010

5. 2014 Economic Forecast
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Greenbuild 2010

6. 2014 Economic Forecast
The U.S.
Economy

7. 2014 Economic Forecast
 Economy has been growing at a barely acceptable rate
 Employment growing, but should be faster
 Unemployment rate down, but not always for the right
reasons
 Inflation moderate
 Single-family housing recovering, but from a very low
level
 Multifamily largely recovered, but still room to grow
 Lending standards, although improving, remain
relatively tight
7
Greenbuild 2010

8. 2014 Economic Forecast
Risks to the
Economy
8

9. 2014 Economic Forecast
 The federal budget/government shutdown
 The federal debt ceiling
 Europe
 European government debt default
 The euro
 Energy (oil) prices
9
Greenbuild 2010

10. 2014 Economic Forecast
Commercial construction
turned around in 2012
and is expected to
continue to improve
10

11. 2014 Economic Forecast
Construction Spending and
its Components
$ Billions
1,400
History
1,300
Forecast
1,200
1,100
1,000
900
800
700
600
500
400
300
200
100
0
02
03
04
Residential
05
06
07
08
09
Nonresidential Building
10
11
12
13
14
15
Heavy Construction
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
11
Greenbuild 2010

12. 2014 Economic Forecast
Reed Total Starts
(3-Mo MA YoY)
3-Month Moving Average, Year-over-Year % Change
45
40
35
30
25
20
15
10
5
0
-5
-10
-15
-20
-25
-30
-35
Source: Reed Construction Data
12
Greenbuild 2010

13. 2014 Economic Forecast
Total Construction Spending
1,250
Billion $, SAAR
1,200
1,150
1,100
1,050
1,000
950
900
850
800
750
700
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
2012
2013
2014
2015
13
Greenbuild 2010

14. 2014 Economic Forecast
Residential
construction is
recovering, but
from a low level
14

15. 2014 Economic Forecast
Total Housing Starts
Thousands of Units, SAAR
2,500
Nation’s long-run (trend)
need for the next decade
High Estimate
(1.8 million starts per year)
2,250
2,000
1,750
1,500
1,250
Nation’s long-run (trend)
need for the next decade
Low Estimate
(1.4 million starts per year)
1,000
750
500
250
0
88
89
90
91
92
93
94
95
Source: U.S. Census Bureau
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
15
Greenbuild 2010

16. 2014 Economic Forecast
Total Housing Starts
(3-Month Moving Average)
Thousands of Units, SAAR
2,500
Nation’s long-run (trend)
need for the next decade
High Estimate
(1.8 million starts per year)
2,250
2,000
1,750
1,500
1,250
Nation’s long-run (trend)
need for the next decade
Low Estimate
(1.4 million starts per year)
1,000
750
500
250
0
2000
2001
2002
2003
Source: U.S. Census Bureau
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
16
Greenbuild 2010

17. 2014 Economic Forecast
Single-family housing
market is slowly
recovering
17

18. 2014 Economic Forecast
Single-Family Housing Starts
Thousands of Units, SAAR
2,000
Nation’s long-run (trend)
need for the next decade
High Estimate
(1.45 million starts per year)
1,800
1,600
1,400
1,200
1,000
Nation’s long-run (trend)
need for the next decade
Low Estimate
(1.1 million starts per year)
800
600
400
200
0
88
89
90
91
92
93
94
95
Source: U.S. Census Bureau
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
18
Greenbuild 2010

19. 2014 Economic Forecast
Single-Family Housing Starts
(3-Month Moving Average)
Thousands of Units, SAAR
2,000
Nation’s long-run (trend)
need for the next decade
High Estimate
(1.45 million starts per year)
1,800
1,600
1,400
1,200
1,000
800
Nation’s long-run (trend)
need for the next decade
Low Estimate
(1.1 million starts per year)
600
400
200
0
2000
2001
2002
2003
Source: U.S. Census Bureau
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
19
Greenbuild 2010

20. 2014 Economic Forecast
The multifamily
construction market is
near normal
20

21. 2014 Economic Forecast
Multifamily Housing Starts
Thousands of Units, SAAR
500
450
Nation’s long-run (trend)
need for the next decade
High Estimate
(350,000 starts per year)
400
350
300
250
Nation’s long-run (trend)
need for the next decade
Low Estimate
(300,000 starts per year)
200
150
100
50
0
88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Source: U.S. Census Bureau
21
Greenbuild 2010

22. 2014 Economic Forecast
Multifamily Housing Starts
1,200
Thousands of Units, SAAR
1,100
1,000
900
800
700
Nation’s long-run (trend)
need for the next decade
High Estimate
(350,000 starts per year)
600
500
400
300
200
Nation’s long-run (trend)
need for the next decade
Low Estimate
(300,000 starts per year)
100
0
59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13
Source: U.S. Census -Bureau
22
Greenbuild 2010

23. 2014 Economic Forecast
Multifamily Housing Starts
(3-Month Moving Average)
500
Thousands of Units, SAAR
Nation’s long-run (trend)
need for the next decade
High Estimate
(350,000 starts per year)
450
400
350
300
250
Nation’s long-run (trend)
need for the next decade
Low Estimate
(300,000 starts per year)
200
150
100
50
0
00
01
02
03
Source: U.S. Census Bureau
04
05
06
07
08
09
10
11
12
13
23
Greenbuild 2010

24. 2014 Economic Forecast
The falling
homeownership
rate is a two
edged sword
24

25. 2014 Economic Forecast
Homeownership Rate
70
Percent
69
68
Peak rate:
Q2 2004
69.4%
67
66
Lowest rate:
Q4 1985
63.6%
65
65.1%
64
63
80
82
84
86
88
Source: U.S. Census Bureau
90
92
94
96
98
00
02
04
06
08
10
12
25
Greenbuild 2010

26. 2014 Economic Forecast
Rental Rate
37
Percent
36
Highest rate:
Q4 1985
36.4%
35
34.9%
34
33
Lowest rate:
Q2 2004
30.6%
32
31
30
80
82
84
86
88
Source: U.S. Census Bureau
90
92
94
96
98
00
02
04
06
08
10
12
26
Greenbuild 2010

27. 2014 Economic Forecast
Rental Vacancy Rate (SA)
11.5
Percent
Peak rate:
Q3 2009
10.9%
11.0
10.5
10.0
9.5
9.0
8.5
8.0
8.1%
7.5
7.0
6.5
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Source: U.S. Census Bureau
Seasonal Adjustment: Moody’s Analytics
27
Greenbuild 2010

28. 2014 Economic Forecast
Residential
construction
spending
28

29. 2014 Economic Forecast
Residential Spending Components
800
$ Billions
History
700
Forecast
600
500
400
300
200
100
0
02
03
04
05
06
Improvements
07
08
09
10
Single-family
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
11
12
13
14
15
Multifamily
29
Greenbuild 2010

30. 2014 Economic Forecast
Reed Residential Starts
(3-Mo MA YoY)
3-Month Moving Average, Year-over-Year % Change
50
40
30
20
10
0
-10
-20
-30
-40
-50
-60
Source: Reed Construction Data
30
Greenbuild 2010

31. 2014 Economic Forecast
Construction Spending:
New Residential Construction
Billion $, SAAR
550
500
450
400
350
300
250
200
150
100
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
09
10
11
12
13
14
15
31
Greenbuild 2010

32. 2014 Economic Forecast
Residential Construction Spending
450
$ Billions
400
2002
350
to
2012
’13 ’14 ’15
300
250
200
150
100
50
0
Single-Family
Multifamily
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Improvements
32
Greenbuild 2010

33. 2014 Economic Forecast
Residential Construction Spending
450
$ Billions
400
2006
350
to
2012
’13 ’14
’15
300
250
200
150
100
50
0
Single-Family
Multifamily
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Improvements
33
Greenbuild 2010

34. 2014 Economic Forecast
Nonresidential building
construction has struggled,
but is expected to improve
over the remainder of this
year and strengthen further
in 2014 and 2015
34

35. 2014 Economic Forecast
Reed Nonresidential Starts
(3-Mo MA YoY)
3-Month Moving Average, Year-over-Year % Change
35
30
25
20
15
10
5
0
-5
-10
-15
-20
-25
-30
-35
-40
Source: Reed Construction Data
35
Greenbuild 2010

36. 2014 Economic Forecast
Construction Spending:
Nonresidential Construction
Billion $, SAAR
475
450
425
400
375
350
325
300
275
250
225
200
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
2012
2013
2014
2015
36
Greenbuild 2010

37. 2014 Economic Forecast
Nonresidential Construction Spending
100
$ Billions
90
80
2006
to
2012
’13 ’14
’15
70
60
50
40
30
20
10
0
Hotel/Lodging
Office
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Commercial
37
Greenbuild 2010

38. 2014 Economic Forecast
Nonresidential Construction Spending
110
$ Billions
100
90
2006
to
2012
’13 ’14
’15
80
70
60
50
40
30
20
10
0
Religious
Healthcare
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Education
38
Greenbuild 2010

39. 2014 Economic Forecast
Nonresidential Construction Spending
70
60
$ Billions
2006
to
2012
’13 ’14
’15
50
40
30
20
10
0
Public safety
Amusement and recreation
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Manufacturing
39
Greenbuild 2010

40. 2014 Economic Forecast
Heavy engineering
(non-building)
construction held
up best over the
last few years
40

41. 2014 Economic Forecast
Despite considerable
challenges, the outlook
for heavy engineering
construction is fairly
positive
41

42. 2014 Economic Forecast
Reed Heavy Engineering Starts
(3-Mo MA YoY)
3-Month Moving Average, Year-over-Year % Change
90
80
70
60
50
40
30
20
10
0
-10
-20
-30
-40
-50
-60
Source: Reed Construction Data
42
Greenbuild 2010

43. 2014 Economic Forecast
Construction Spending:
Heavy Engineering
Billion $, SAAR
325
300
275
250
225
200
175
150
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
2012
2013
2014
2015
43
Greenbuild 2010

44. 2014 Economic Forecast
Heavy Engineering Construction Spending
120
$ Billions
110
100
2006
to
2012
’13 ’14
’15
90
80
70
60
50
40
30
20
10
0
Transportation
Communication
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Power
44
Greenbuild 2010

45. 2014 Economic Forecast
Heavy Engineering Construction Spending
100
$ Billions
90
2006
80
to
2012
’13 ’14
’15
70
60
50
40
30
20
10
0
Highway
Water and Sewer
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Conservation
45
Greenbuild 2010

46. 2014 Economic Forecast
A look at regional
economic
performance
46

47. 2014 Economic Forecast
Source: Philadelphia Federal Reserve Bank
47

48. 2014 Economic Forecast
Source: Philadelphia Federal Reserve Bank
48

49. 2014 Economic Forecast
Building Materials
Prices
49

50. 2014 Economic Forecast
PPI: Construction (Unprocessed) Materials
230
1982 = 100, Not Seasonally Adjusted
Y/Y %
30
219.9
PPI Index (LHS)
220
25
210
20
200
15
190
180
10
Y/Y % (RHS)
3.3%
5
170
0
160
Up 13% from
recession low
(December 2008)
150
140
130
-5
-10
-15
Source: Bureau of Labor Statistics
50
Greenbuild 2010

51. 2014 Economic Forecast
PPI: Materials and Components for
Construction (Processed Goods)
230
220
210
1982 = 100, Not Seasonally Adjusted
Up 16% from
recession low
(December 2007)
Y/Y %
12
223.5
200
190
14
10
8
Y/Y % (RHS)
180
6
2.0%
4
170
2
160
0
150
-2
140
-4
130
PPI Index (LHS)
120
-6
-8
Source: Bureau of Labor Statistics
51
Greenbuild 2010

52. 2014 Economic Forecast
IRON & STEEL SCRAP PRICES
900
800
700
1982 = 100, Not Seasonally Adjusted
Down 36%
from peak
(Jul 2008)
Y/Y %
Up 119% from
recession low
(Nov 2008)
140
120
100
600
500
160
80
60
Y/Y % (RHS)
513.6
400
40
20
300
0
-20
200
-3.4%
100
PPI Index (LHS)
0
-40
-60
-80
Source: Bureau of Labor Statistics
52
Greenbuild 2010

53. 2014 Economic Forecast
STEEL MILL PRODUCTS PRICES
300
275
250
1982 = 100, Not Seasonally Adjusted
Down 24%
from peak
(Aug 2008)
Up 27% from
recession low
(May 2009)
Y/Y %
Y/Y % (RHS)
60
50
40
225
194.3
30
200
20
175
10
150
0
125
-10
-4.4%
100
-20
75
PPI Index (LHS)
50
-30
-40
Source: Bureau of Labor Statistics
53
Greenbuild 2010

54. 2014 Economic Forecast
STEEL PIPE AND TUBE PRICES
300
275
250
June 1982 = 100, Not Seasonally Adjusted
Down 13%
from peak
(Feb 2012)
Y/Y %
Up 26% from
recession low
(Dec 2007)
70
60
50
253.7
225
200
40
30
Y/Y % (RHS)
175
20
150
10
125
0
100
-10
-6.1%
75
PPI Index (LHS)
50
-20
-30
Source: Bureau of Labor Statistics
54
Greenbuild 2010

55. 2014 Economic Forecast
INDUSTRIAL NATURAL GAS PRICES
350
December 1990= 100, Not Seasonally Adjusted
Down 50%
from peak
(Jul 2008)
325
300
275
250
Y/Y %
150
125
Up 9%
from low
(May 2012)
100
75
225
200
Y/Y % (RHS)
168.9
50
175
25
150
3.7%
125
0
100
-25
75
PPI Index (LHS)
50
-50
Source: Bureau of Labor Statistics
55
Greenbuild 2010

56. 2014 Economic Forecast
PETROLEUM REFINERIES PRICES
500
450
400
June 1985 = 100, Not Seasonally Adjusted
Y/Y %
Up 74% from
recession low
(Dec 2008)
Down 16%
from peak
(Jul 2008)
100
80
350
377.7
300
120
60
Y/Y % (RHS)
40
250
20
200
0
150
-8.3%
100
50
PPI Index (LHS)
0
-20
-40
-60
Source: Bureau of Labor Statistics
56
Greenbuild 2010

57. 2014 Economic Forecast
Crude Oil (Brent) Spot Prices
160
140
120
$ per Barrel, Not Seasonally Adjusted
Down 18%
from peak of
$132.72
(Jul 2008)
Y/Y %
Up 173% from
recession low
of $39.95
(Jul 2008)
180
160
140
120
100
100
80
Down 13% from
recent peak of
$125.45
(Mar 2012)
$109.08
80
60
40
60
20
40
0
-2.4%
20
-20
-40
0
-60
Source: U.S. Energy Information Administration (EIA)
57
Greenbuild 2010

58. 2014 Economic Forecast
Connect with Reed Construction Data
 Twitter
twitter.com/Bmarkstein
 Twitter
twitter.com/ReedConstrData
 Facebook
www.facebook.com/Reed-Construction-Data
 LinkedIn
www.linkedin.com/company/reed-construction-data
 web
www.reedconstructiondata.com
58
Greenbuild 2010

59. 2014 Economic Forecast
Contact Information and Links
Bernard M. Markstein
 Office: 301-588-5190
 Mobile: 404-952-3381
 b.markstein@reedbusiness.com
 U.S. Forecast and Commentary:
http://www.reedconstructiondata.com/marketintelligence/articles/
 Blog:
http://www.reedconstructiondata.com/marketintelligence/bernie-markstein/
59
Greenbuild 2010