Wright Express Corporation in collaboration with IHS released results of its Wright Express Construction Fuel Consumption Index (FCI), which indicated a decrease of 0.8 percent in September 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.
“The decline in the year-over-year results, combined with the first monthly uptick seen in recent reports, serves as another reminder that the U.S. construction industry has yet to forge a clear path to recovery,” said Rick Pomerleau, vice president, corporate development at Wright Express.
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 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 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 2012, the Wright Express Construction FCI reported that fuel consumption by U.S. construction companies increased 0.7 percent versus the previous month and decreased by 0.8 percent versus September 2011.
Last month’s Wright Express Construction FCI corresponded with decreased construction spending levels evident in most of the government’s subsequent construction data releases, which reinforced the short-term picture of a weak construction market. Construction spending excluding improvements — a good measure of activity — declined by 0.4 percent in August, while private residential construction showed positive growth of 3.0 percent. August housing permit statistics mirrored the declining fuel consumption index by falling 1.0 percent in August to an annual rate of 803,000. Housing starts did climb to their second highest level since October 2008 with an increase of 2.3 percent in August. Total construction put-in-place decreased by 0.6 percent in August.
IHS Analysis
According to the IHS analysis, the mild rise in the Wright Express Fuel Consumption Index in September coincides with recent housing statistics, which suggests modest improvement. Existing home sales jumped 7.8 percent in August, which is the best figure since May 2010. Although there were some larger increases in 2009 and 2010, those were boosted by tax credits, while increased home sales in August were driven by economic fundamentals including an improving economy, low interest rates, and a drop in home sales cancellation rate.
Normal economic conditions are still at least a couple of years away even though the housing market is expected to see some improvement this year. The rise of home prices in recent months is due to a rising demand by investors, low interest rates, and a drop in the proportion of distressed sales. Any gain in prices is good news because the price gains reduce the number of homeowners with “underwater” mortgages. The housing market will continue to improve, as long as the economy is creating jobs. The current economic outlook, however, is for a modest recovery that lasts three to four years, not the sharp upswing that characterizes most housing recoveries.
The Wright Express Construction FCI for September 2012 is available at www.wrightexpress.com/fci.
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