Beige Book Comments Relevant to US Construction and in OH, Western PA, Eastern KY and part of WV

The “Beige Book” is a compilation of informal soundings of business conditions in each of the 12 Federal Reserve Districts, which are referenced by the name of their headquarters cities. The latest (October 2018) Beige Book (https://www.federalreserve.gov/monetarypolicy/files/BeigeBook_20181024.pdf), is based on information collected from September through mid-October and included these comments relevant to construction:

U.S. Summary: Economic activity expanded across the United States, with the majority of Federal Reserve districts reporting modest to moderate growth….Employers throughout the country continued to report tight labor markets and difficulties finding qualified workers, including highly skilled engineers, finance and sales professionals, construction and manufacturing workers, IT professionals, and truck drivers.

Fourth District:

Employment and Wages: Contacts generally reported business conditions that were favorable and stable as supporting their overall demand for workers. However, worker shortages, in terms of both quantity and quality, were noted across many sectors….One construction contact reported taking a more targeted approach by giving 10 percent to 15 percent raises on a case-by-case basis; firm-wide, wages were raised by only about 2 percent.

Prices: Construction contacts reported increases in prices for LED lighting, concrete, steel, lumber, and copper. Only one construction contact noted that the diversion of materials for hurricane relief may have had an additional impact on prices. A few contacts remarked that the amount of time suppliers held their prices constant had diminished noticeably….Freight and construction firms were less aggressive in raising their prices than in the previous survey period. Construction contacts commented that they were raising their prices enough to maintain their margins. By contrast, one builder remarked his firm was holding prices and offering more incentives and giveaways.

Real Estate and Construction: Nonresidential builders reported a pickup in demand after a lull during the prior period. Demand growth was driven by private spending; demand from the public side was still low. Builders note that backlogs are still high and pointing to strength in the broader economy, and they expect growth to continue in the near term. Nonresidential construction prices are rising as builders pass through increasing materials costs, especially for metals, but builders are not increasing their margins.