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Construction Fuel Consumption Indicates “Fragile” Recovery

Wed June 27, 2012 - National Edition
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The Wright Express Construction FCI measures national fuel consumption statistics for the construction industry.
The Wright Express Construction FCI measures national fuel consumption statistics for the construction industry.

Wright Express Corporation, a global provider of value-based business payment processing and information management solutions, in collaboration with IHS, a global source of information and analytics, released results of its Wright Express Construction Fuel Consumption Index (FCI), which indicated an increase of 5.1 percent in May versus its level the previous year.

The Wright Express Construction FCI measures national fuel consumption statistics for the construction industry, which provides an accurate and up-to-date indication of construction activity in the United States.

Wright Express worked with IHS to capture and analyze transaction data from its closed loop network of more than 180,000 fuel and vehicle maintenance locations, including over 90 percent of the domestic retail fuel locations and 45,000 vehicle maintenance locations. With this data, the Wright Express Construction FCI can be used to identify emerging trends within the construction industry and the national economy.

The indicators were tested at monthly, quarterly and annual frequencies, with the greatest insights produced using the year-over-year percent change of the monthly data. For May 2012, the Wright Express Construction FCI reported that fuel consumption by U.S. construction companies increased by 5.1 percent versus May 2011 and increased by 4.5 percent versus the previous month.

The Wright Express Construction FCI is available monthly in advance of the U.S. Census Bureau figures on construction spending.

Last month’s Wright Express Construction FCI accurately captured the weakness evident in many of the government’s subsequent construction data releases. Construction spending excluding improvements — a good measure of activity — declined 0.2 percent in April. Private nonresidential spending decreased by 0.2 percent, although private residential construction excluding improvements rose 2.1 percent. Total construction put-in-place increased by 0.3 percent in April.

IHS Analysis

According to the IHS analysis, the up-and-down nature of the Wright Express Construction FCI in recent months suggests that the industry’s recovery is still somewhat fragile. After three years of depressed construction, the inventory of new housing is beginning to tighten. New home sales rose 3.3 percent in April, and estimates for the previous three months were revised upward. The new home sales market is, although activity is still less than half of normal. Inventory continues to shrink, which is good news since builders will have to replenish stocks by ramping up starts once demand rebounds.

Meanwhile, to echo last month’s report, getting rid of the excess housing supply could be a drawn-out affair. The homeowner vacancy rate measuring the proportion of homes that are vacant and for sale was 2.3 percent at the end of 2011. This vacancy rate is consistent with a glut of about one half of a million houses. At the current pace, eliminating the overhang should take less than two years, but will probably take longer, because it is concentrated in a few high-unemployment states.

For more information, visit wrightexpress.com.