WEX Inc., a provider of corporate payment solutions, in collaboration with IHS, Inc., global source of critical information and insight, released results of its WEX Construction Fuel Consumption Index (FCI), which indicated a decrease of 0.6 percent in May versus its level at the same time the previous year.
The WEX 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.
WEX worked with IHS to capture and analyze transaction data from its closed loop network, which includes more than 90 percent of the domestic retail fuel locations. With this data, the WEX 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 2013, the WEX Construction FCI reported that fuel consumption by U.S. construction companies decreased 0.6 percent versus May 2012 and increased 0.8 percent versus the previous month.
The WEX Construction FCI reflected the first year-over-year decline since September 2012, and additional government data releases were generally more positive than the 0.7 percent decline indicated by the seasonally-adjusted index in April. Private residential construction increased by 1.7 percent in April and construction spending excluding improvements — a good measure of activity — rose by 0.9 percent in the same period. Housing permits surged by 14.3 percent to an annual rate of 1.02 million, which is the highest rate since June 2008; however, housing starts dropped in April by 16.5 percent to an annual rate of 853,000.
Total construction put-in-place, which is released a month later than the WEX Construction FCI, increased by 0.4 percent in April. The total employment report was positive with an increase of 175,000 jobs, and the construction industry gained 7,000 jobs, indicating that the private sector is largely shrugging off the federal government spending sequester.
According to the IHS analysis, alongside the month-to-month gain in May for the WEX Construction FCI, the housing market also has been showing signs of improvement. New home sales increased by 2.3 percent in April to a 454,000-unit annual rate. Meanwhile, existing home sales rose 0.6 percent in April and total inventory increased by 11.9 percent, although much of the increase was seasonal and inventories remain extremely lean.
Home prices continue to rise as a result of these lean inventories, low interest rates, the growing economy and the decreased share of distressed homes. These higher home prices, in turn, are bringing more builders into the game. The housing market is expected to continue to improve and outperform the rest of the economy over the next few quarters, due to the low level of housing inventory and low interest rates. The recovery in housing would be even stronger if it was not for the difficult lending requirements facing would-be buyers.
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