Wright Express Corporation, an international provider of business payment processing and information management solutions, in collaboration with IHS, a leading provider of global economic and financial intelligence, released results of its Wright Express Construction Fuel Consumption Index (FCI), which indicated an increase of 2.7 percent on an annual basis in September.
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. 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 analysis of the September 2011 data, although reporting a slight decline in fuel consumption from last month, continues to indicate a positive, gradual growth for the construction industry,” said Michael Dubyak, Wright Express chairman and chief executive officer. The report also helps to substantiate recent construction industry employment gains, with a jump in September similar to a level not seen since February, and reflects a slow, but continuous recovery in activity.”
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 September 2011, the Wright Express Construction FCI reported that fuel consumption by U.S. construction companies rose by 2.7 percent versus September 2010; and declined by 0.4 percent versus the previous month. The positive year-over-year growth shows an encouraging turn for the construction industry as it recovers from low levels.
The Wright Express Construction FCI, which is available monthly in advance of the U.S. Census Bureau of the Department of Commerce figures on construction spending, is available at www.wrightexpress.com/fci.
September 2011 Wright Express Construction Fuel Consumption Index (FCI)
According to the Wright Express Construction FCI, the construction industry is recovering from low levels of fuel consumption with a positive year-over-year growth throughout 2011. Despite experiencing a month-to-month decline, the index increased 2.7 percent on an annual basis in September.
After growing in August, the seasonally-adjusted index declined by 0.4 percent in September. Growth in the seasonally adjusted index has been relatively flat throughout 2011. While growth in the industry has been slow, consistent year-over-year fuel consumption growth suggests construction activity is gradually recovering.
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 September result of the Wright Express Construction Fuel Consumption Index indicates that the construction industry is only making small steps on the road to recovery. For example, the value of construction put in place is up 1 percent from a year ago, but it remains 34 percent below its pre-recession peak. Though September’s loss in the FCI was minimal, it is a sign that growth in the construction industry is not yet ready to take off. There have been some positive signs in the construction industry, but the housing sector remains a major concern due to pending home foreclosures and weak demand. With sluggish economic growth on the horizon, home construction is not expected to have much pick up until the latter portion of 2012, and sustained improvement is not likely to be evident prior to 2013.
Index Methodology
The Wright Express Construction Fuel Consumption Index (Wright Express Construction FCI) was developed by IHS Global Insight 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 Global Insight with input from Wright Express. The sample included only accounts that had been active for at least two years. In this way, IHS Global Insight 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 Global Insight 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, 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. 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 September 2011 was 0.897 for the number of new single-family homes for sales and 0.895 for total construction put-in-place.
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