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Educate the Editor

What the Heck is Going on in the Construction Market?

By Roland Murphy for Arizona Builder’s Exchange

Even before I came to AZBEX, my prior careers in corporate marketing and investigative reporting forced me to pay attention to market trends, applied economics, all that jazz.

I don’t claim to be an economist, but I am a relatively bright guy. I understand the fundamental differences between Milton and Keynes. The operating principles of supply and demand are pretty straightforward. Generally speaking, I tend to “get” trends and developments.

Before I ask for your help, gentle reader, let me throw out the caveat that I understand individual data points do not a trend make, but I’m seriously scratching my head over some recent construction market reports.

  • Homebuilders are reporting scarcity in the availability of framing lumber…
  • But wood is the only construction material that’s experiencing a decrease in price.
  • In Q2, nonresidential fixed investment, the barometer of nonresidential construction activity, expanded at a seasonally adjusted annual rate of 5.2 percent, twice the rate of the overall GDP. Cool.
  • Also, June experienced the lowest construction unemployment rate on record for the month – a mere 4.5 percent. Hooray.
  • BUT, nonresidential construction spending fell a whopping 2 percent in June, the first month since January where spending fell below a threshold of $700B.

Materials are getting harder to find, but prices are going down. Investment expands and industry unemployment falls, but spending plummets. Huh?

I love sussing out a good paradox, but these apparently contradictory bits of data have me flummoxed.

Maybe it’s just ego – I’ve been accused of it before – but I have to assume I’m not the only one a little bit puzzled.

So, I invite you, as industry experts and visionaries, to do as Denzel said in “Philadelphia” and, “Explain it to me like I’m a four-year-old.”

Send your thoughts, explanations and, if necessary, finger puppet demonstrations to me at rmurphy@azbex.com. Depending on the responses we get, we may publish your input in an upcoming issue.

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