Wright Express Corporation, an international provider of business payment processing and information management solutions, in collaboration with IHS, a provider of global economic and financial intelligence, Sept. 27 released its inaugural Wright Express Construction Fuel Consumption Index (FCI).
The Wright Express Construction FCI measures national fuel consumption statistics for the construction industry, which provides an up-to-date indication of construction activity in the United States. The construction segment comprises approximately 20 percent of the Wright Express portfolio of customers.
Wright Express worked with IHS Consulting and Advisory Services to capture and analyze transaction data from its closed loop network of more than 180,000 fuel and vehicle maintenance locations, including more than 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 Wright Express Construction Fuel Consumption Index, through our partnership with IHS, taps into our deep well of fuel consumption data for real-time analysis. Each month, beginning with the announcement of the August 2011 data, we plan to release statistics that could be an aide in providing insights around current construction activity and the overall economic landscape,” said Michael Dubyak, Wright Express chairman and chief executive officer.
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 August 2011, the Wright Express Construction FCI reported that fuel consumption by U.S. construction companies rose by 3.9 percent versus August 2010 and expanded by 1.1 percent versus the previous month. The latest result continues the trend of the index rising on an annual basis in every month of 2011.
The Wright Express Construction FCI, which is scheduled to be available in advance of the U.S. Census Bureau of the Department of Commerce figures on construction spending, will be released on a monthly basis going forward and made available at www.wrightexpress.com/fci.
August 2011 Wright Express Construction Fuel Consumption Index (FCI)
According to the Wright Express Construction FCI, the construction industry appears to be trending upwards as evidenced by the index increase of 3.9 percent on an annual basis in August. The index has had positive year-over-year growth throughout 2011. Consistent annual fuel consumption growth suggests the construction industry is expanding, albeit rather slowly.
In August, the FCI saw a 1.1 percent increase over the previous month. Growth in the seasonally adjusted index has been relatively flat in recent months, and this month’s result marks the first change of more than 1 percent since February.
Note: The “value of construction put in place” is a measure of the value of construction installed or erected at the site during a given period. For an individual project, this includes cost of materials, cost of labor, contractor’s profit, cost of architectural/engineering work, misc. overhead and interest/taxes.
IHS Analysis
According to IHS’s analysis, the August result of the Wright Express Construction FCI is positive news for a market which needs it. Nonetheless, this result should be regarded with caution, as the construction market remains fragile and the recovery will be slow. U.S. construction activity is not expected to really pick up until 2012. The residential construction category had been gathering its fundamentals to recover, but financial turmoil in August has deferred the recovery from early to later 2012. Meanwhile, the nonresidential construction category should get better in the first half of 2012, but will be unstable for a few quarters before a clear recovery sets in. Public construction will likely continue to be a drag on the market during 2011 and 2012.
Index Methodology
The Wright Express Construction Fuel Consumption Index (Wright Express Construction FCI) was developed by IHS Consulting and Advisory Services with support from Wright Express. The index is based on monthly fuel consumption statistics for the construction industry tracked by Wright Express’s comprehensive fuel consumption database. The Wright Express Construction FCI provides unique fuel transaction information that can be used to identify emerging trends in the construction industry. By tracking the volume of fuel consumed by construction companies in the United States, the index provides an accurate and up-to-date indication of construction activity in the country.
The construction industry was defined by 1987 Standard Industry Classification (SIC) codes 15 (General building contractors), 16 (Heavy construction contractors), and 17 (Special trade contractors). Data from Wright Express’s fuel transaction database was “cleaned” based on a criteria developed by IHS with input from Wright Express. The sample included only accounts that had been active for at least two years. In this way, IHS was able to effectively capture the construction market’s fuel consumption activity. In order to create an accurate index, the fuel consumption data from each SIC industry code were weighted based on the number of companies in each industry.
IHS analyzed the relationship between 16 different construction and housing indicators and the construction sector fuel consumption data provided by Wright Express. Correlation tests were conducted on each of the indicators against the volume of gallons consumed, the volume of gallons consumed per effective fueling day, and the volume of gallons consumed per active card per effective fueling day. All series were tested at seasonally adjusted rates, as well as non-seasonally adjusted rates.
The indicators were tested at monthly, quarterly and annual frequencies. IHS found that the greatest insights were produced using the year-over-year percent change of the monthly data. After determining the top three indicators, additional correlation tests were conducted to determine the optimal transformation of the Wright Express fuel consumption data. Through this analysis, it was revealed that the Wright Express Construction FCI for construction was a particularly strong indicator of the value of total construction put-in-place and construction industry employment in the United States. The overall correlation based upon monthly year-over-year growth rates from January 2002 to August 2011 was 0.897 for total construction put-in-place and 0.894 for construction employment.
About Wright Express
Wright Express Corporation is an international provider of value-based, business payment processing and information management solutions. The Company’s fleet, corporate and prepaid payment solutions provide its more than 350,000 customers with security and control across a wide spectrum of business sectors. The company’s subsidiaries include Wright Express Financial Services, Pacific Pride and Wright Express International, including Wright Express Prepaid Cards Australia and Wright Express Fuel Cards Australia. Wright Express and its subsidiaries employ more than 850 associates in six countries.
For more information about Wright Express, visit wrightexpress.com.
About IHS
IHS is a leading source of information and insight in critical areas that shape today’s business landscape, including energy and power; design and supply chain; defense, risk and security; environmental, health and safety (EHS) and sustainability; country and industry forecasting; and commodities, pricing and cost. Businesses and governments in more than 165 countries around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in Englewood, Colo., IHS employs more than 5,100 people in more than 30 countries around the world.
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