Steel framing industry association webinar nov 19, 2013

SFIA Webinar

November 19, 2013

Greenbuild 2010

2014 Economic Forecast:

Cold-Formed Steel and

Construction

Presented by: Bernard M. Markstein

Reed U.S. Chief Economist

2014 Economic Forecast

Greenbuild 2010

About Reed Construction Data

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Greenbuild 2010

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Greenbuild 2010

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and industry analysis to keep your business

profitable–even in this tough economic climate.


The U.S. Economy


7

Greenbuild 2010

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


8

Risks to the

Economy


9

Greenbuild 2010

The federal budget/government shutdown

The federal debt ceiling

Europe

European government debt default

The euro

Energy (oil) prices


10

Commercial construction

turned around in 2012

and is expected to

continue to improve


11

Greenbuild 2010

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

02 03 04 05 06 07 08 09 10 11 12 13 14 15

Residential Nonresidential Building Heavy Construction

$ Billions

History Forecast

Source: History – U.S. Census Bureau; Forecast – Reed Construction Data

Construction Spending and

its Components


12

Greenbuild 2010

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

35

40

453-Month Moving Average, Year-over-Year % Change

Reed Total Starts (3-Mo MA YoY)

Source: Reed Construction Data


13

Greenbuild 2010

700

750

800

850

900

950

1,000

1,050

1,100

1,150

1,200

1,250

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Billion $, SAAR

Total Construction Spending



14

Residential

construction is

recovering, but

from a low level


15

Greenbuild 2010

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

2,500

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

Thousands of Units, SAAR

Nation’s long-run (trend)

need for the next decade

Low Estimate

(1.4 million starts per year)



High Estimate


Total Housing Starts

Source: U.S. Census Bureau


16

Greenbuild 2010

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

2,500

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013




Low Estimate




High Estimate


Total Housing Starts (3-Month Moving Average)



17

Single-family housing

market is slowly

recovering


18

Greenbuild 2010

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

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




High Estimate




Low Estimate


Single-Family Housing Starts



19

Greenbuild 2010

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013




Low Estimate




High Estimate


Single-Family Housing Starts (3-Month Moving Average)



20

The multifamily

construction market is

near normal


21

Greenbuild 2010

0

50

100

150

200

250

300

350

400

450

500

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




High Estimate

(350,000 starts per year)



Low Estimate


Multifamily Housing Starts



22

Greenbuild 2010

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

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




High Estimate




Low Estimate


Multifamily Housing Starts

Source: U.S. Census -Bureau


23

Greenbuild 2010

0

50

100

150

200

250

300

350

400

450

500

00 01 02 03 04 05 06 07 08 09 10 11 12 13




Low Estimate




High Estimate


Multifamily Housing Starts (3-Month Moving Average)



24

The falling

homeownership

rate is a two

edged sword


25

Greenbuild 2010

63

64

65

66

67

68

69

70

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12

Homeownership Rate Percent

Lowest rate:

Q4 1985

63.6%

Peak rate:

Q2 2004

69.4%

65.1%



26

Greenbuild 2010

30

31

32

33

34

35

36

37

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12

Rental Rate Percent

Highest rate:

Q4 1985

36.4%

Lowest rate:

Q2 2004

30.6%

34.9%



27

Greenbuild 2010

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

11.5

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Rental Vacancy Rate (SA) Percent

Peak rate:

Q3 2009

10.9%

8.1%


Seasonal Adjustment: Moody’s Analytics


28

Residential

construction

spending


29

Greenbuild 2010

0

100

200

300

400

500

600

700

800

02 03 04 05 06 07 08 09 10 11 12 13 14 15

Improvements Single-family Multifamily

$ Billions

Residential Spending Components


History Forecast


30

Greenbuild 2010

-60

-50

-40

-30

-20

-10

0

10

20

30

40


Reed Residential Starts (3-Mo MA YoY)



31

Greenbuild 2010

100

150

200

250

300

350

400

450

500

550

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Billion $, SAAR


Construction Spending:

New Residential Construction


32

Greenbuild 2010

0

50

100

150

200

250

300

350

400

450

Single-Family Multifamily Improvements

$ Billions

2002 to 2012 ’13 ’14 ’15

Residential Construction Spending



33

Greenbuild 2010

0

50

100

150

200

250

300

350

400

450

Single-Family Multifamily Improvements

$ Billions

2006 to 2012 ’13 ’14 ’15

Residential Construction Spending



34

Nonresidential building

construction has struggled,

but is expected to improve

over the remainder of this

year and strengthen further

in 2014 and 2015


35

Greenbuild 2010

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

30


Reed Nonresidential Starts (3-Mo MA YoY)



36

Greenbuild 2010

200

225

250

275

300

325

350

375

400

425

450

475

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Billion $, SAAR


Nonresidential Construction



37

Greenbuild 2010

0

10

20

30

40

50

60

70

80

90

100

Hotel/Lodging Office Commercial

$ Billions

2006 to 2012 ’13 ’14 ’15

Nonresidential Construction Spending



38

Greenbuild 2010

0

10

20

30

40

50

60

70

80

90

100

110

Religious Healthcare Education

$ Billions

2006 to 2012 ’13 ’14 ’15




39

Greenbuild 2010

0

10

20

30

40

50

60

70

Public safety Amusement and recreation Manufacturing

$ Billions

2006 to 2012 ’13 ’14 ’15




40

Heavy engineering

(non-building)

construction held

up best over the

last few years


41

Despite considerable

challenges, the outlook

for heavy engineering

construction is fairly

positive


42

Greenbuild 2010

Reed Heavy Engineering Starts (3-Mo MA YoY)


-60

-50

-40

-30

-20

-10

0

10

20

30

40

50

60

70

80



43

Greenbuild 2010


Heavy Engineering


150

175

200

225

250

275

300

325

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Billion $, SAAR


44

Greenbuild 2010

0

10

20

30

40

50

60

70

80

90

100

110

120

Transportation Communication Power

$ Billions

2006 to 2012 ’13 ’14 ’15

Heavy Engineering Construction Spending



45

Greenbuild 2010

0

10

20

30

40

50

60

70

80

90

100

Highway Water and Sewer Conservation

$ Billions

2006 to 2012 ’13 ’14 ’15

Heavy Engineering Construction Spending



46

A look at regional

economic

performance


47 Source: Philadelphia Federal Reserve Bank


48 Source: Philadelphia Federal Reserve Bank


49

Building Materials

Prices


50

Greenbuild 2010

PPI: Construction (Unprocessed) Materials

-15

-10

-5

0

5

10

15

20

25

30

130

140

150

160

170

180

190

200

210

220

2301982 = 100, Not Seasonally Adjusted Y/Y %

PPI Index (LHS)

Y/Y % (RHS)

219.9

3.3%

Up 13% from

recession low

(December 2008)

Source: Bureau of Labor Statistics


51

Greenbuild 2010

PPI: Materials and Components for

Construction (Processed Goods)


-8

-6

-4

-2

0

2

4

6

8

10

12

14

120

130

140

150

160

170

180

190

200

210

220

230

PPI Index (LHS)

Y/Y % (RHS)

Up 16% from

recession low

(December 2007)

2.0%

223.5



52

Greenbuild 2010

IRON & STEEL SCRAP PRICES


-80

-60

-40

-20

0

20

40

60

80

100

120

140

160

0

100

200

300

400

500

600

700

800

900

Down 36%

from peak

(Jul 2008)

Up 119% from

recession low

(Nov 2008)

Y/Y % (RHS)

PPI Index (LHS)

-3.4%

513.6



53

Greenbuild 2010

STEEL MILL PRODUCTS PRICES


-40

-30

-20

-10

0

10

20

30

40

50

60

50

75

100

125

150

175

200

225

250

275

300

Down 24%

from peak

(Aug 2008)

Up 27% from

recession low

(May 2009)

-4.4%

194.3

PPI Index (LHS)

Y/Y % (RHS)



54

Greenbuild 2010

STEEL PIPE AND TUBE PRICES


-30

-20

-10

0

10

20

30

40

50

60

70

50

75

100

125

150

175

200

225

250

275

300

Down 13%

from peak

(Feb 2012)

Up 26% from

recession low

(Dec 2007)

-6.1%

253.7

PPI Index (LHS)

Y/Y % (RHS)

June 1982 = 100, Not Seasonally Adjusted Y/Y %


55

Greenbuild 2010

INDUSTRIAL NATURAL GAS PRICES


-50

-25

0

25

50

75

100

125

150

50

75

100

125

150

175

200

225

250

275

300

325

350

Down 50%

from peak

(Jul 2008) Up 9%

from low

(May 2012)

3.7%

168.9

PPI Index (LHS)

Y/Y % (RHS)

December 1990= 100, Not Seasonally Adjusted Y/Y %


56

Greenbuild 2010

PETROLEUM REFINERIES PRICES


-60

-40

-20

0

20

40

60

80

100

120

0

50

100

150

200

250

300

350

400

450

500

Down 16%

from peak

(Jul 2008)

Up 74% from

recession low

(Dec 2008)

Y/Y % (RHS)

PPI Index (LHS)

-8.3%

377.7

June 1985 = 100, Not Seasonally Adjusted Y/Y %


57

Greenbuild 2010

Crude Oil (Brent) Spot Prices

Source: U.S. Energy Information Administration (EIA)

-60

-40

-20

0

20

40

60

80

100

120

140

160

180

0

20

40

60

80

100

120

140

160

Down 18%

from peak of

$132.72

(Jul 2008)

Up 173% from

recession low

of $39.95

(Jul 2008)

$ per Barrel, Not Seasonally Adjusted Y/Y %

$109.08

-2.4%

Down 13% from

recent peak of

$125.45

(Mar 2012)


58

Greenbuild 2010

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59

Greenbuild 2010

Contact Information and Links

Bernard M. Markstein

Office: 301-588-5190

Mobile: 404-952-3381

[email protected]

U.S. Forecast and Commentary: http://www.reedconstructiondata.com/market-

intelligence/articles/

Blog: http://www.reedconstructiondata.com/market-

intelligence/bernie-markstein/


http://www.reedconstructiondata.com/market-intelligence/articles/




http://www.reedconstructiondata.com/market-intelligence/bernie-markstein/







Steel framing industry association webinar nov 19, 2013

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