Vermeulens has released its market outlook report for the first quarter of 2021. Key points include:
- Construction Prices: Remained flat in Q1 of 2021, while in March about one-third of contractors had full backlogs compared to the previous year. Currently backlogs in the Northeast are slightly higher than a year ago, while the country is slightly down due to weakness in the South and West.
- Forecast: We continue to recommend a 4% bidding contingency for price shocks due to supply chain input price volatility, and the renewed ability for some contractors to increase their margins as backlogs rebuild. As pandemic fears and restrictions ease, we expect escalation to return sharply, starting in the second half of 2021.
- Fed Watch: The Federal Reserve continued monetary stimulus in line with the “new normal.” The size of this stimulus is substantial and we expect construction sector escalation to be well above long term averages in the medium term.
- Architectural Billings: Q1 has returned to growth in inquiries; however, three quarters of billing declines in 2020 does indicate a lower construction volume for the second half of 2021.
- Construction Dollar Volume: Residential construction continues to boom, reaching new highs in Q1; non‐residential construction is down 7.4%, while infrastructure is up by 1%.
- Contractor Backlog: Northeast backlogs have declined this month but remain higher than pre-pandemic levels. The remainder of the country remains below pre-pandemic levels.
- Commodities: Although construction price inputs have grown by 12% overall, bid prices remain flat as contractors absorb the increases through reduced margins. Covid 19 projections, a declining USD, residential construction spikes, and natural disasters have created short term price spikes in both PVC (30%) and lumber (100%). Steel continues to climb in particular for non-standard shapes.
- Construction Job Growth: Approximately 66,000 construction jobs were added in Q1, or 0.8%; construction employment is still down 2.0% since pre‐pandemic levels.
- Growth in Employment: Monthly average job growth through Q1 was 0.54M as the economic recovery begins to accelerate.
- New York Stock Exchange: The stock market grew by 7% in Q1, and has completely recovered reaching new highs in Q1; overall the NYSE is up 51% from March 2020.
- Gross Domestic Product: Initial GDP projections point to an annualized growth rate of 4.50% for Q1 2021.
- Personal Consumption Expenditures: PCE has nearly fully recovered, rising back up to 1.41% year over year.
The complete Market Outlook Q1-2021 report is available from Vermeulens.