Ohio Construction; Federal Reserve Beige Book of Economic Conditions

During the past three days, four sectors–retail, manufacturing, transportation, and energy–of the Federal Reserve Beige Book Report have been posted. The Beige Book report covers economic conditions of each banking district. In this post, the construction industry is covered as it was reported by the Cleveland Federal Reserve Bank.

New home construction was generally flat at a low level during the past six weeks and on a year-over-year basis, with most sales occurring in the move-up buyer categories. Contractors expect construction to remain sluggish through the winter months. List prices of new homes and discounting have shown little change, while some upward pressure on the cost of building materials was reported. Land purchases and construction of spec homes are constrained by the availability of credit. Subcontractor pricing remains very competitive. General contractors continue to work with lean crews, and no hiring is expected in the near term.

Discussions with nonresidential builders drew mixed responses, with a small majority of our contacts reporting stronger activity than a year ago. There is growing concern over the continuing slowdown in inquiries and tightening margins. However, most builders said they had a sufficient backlog to keep them busy in the upcoming months. New projects generally fall into the health-care category, with some industrial and infrastructure work. Our contacts are uncertain about business conditions through 2011. A few builders mentioned that their customers have the ability to fund projects, but they are hesitant to commit. Builders expect construction material suppliers to begin raising prices early in 2011, but they are uncertain as to the amount or whether the increases will stick. General contractors reported no change in employment levels and wages. Subcontractors continue to cope with very difficult industry conditions.

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