As I write this in late February the stock market is roaring, the government shutdown is over, and forecasters are saying we will duck the recession bullet yet again. Now if the rain would just stop. I don’t know about you but I’m praying for a good old-fashioned drought.
Seriously, this rain has delayed a lot of jobs and we have fabricated rebar waiting to ship at for weeks or even months now at many of our locations. It can’t keep raining like this forever, can it? The one thing the rains haven’t delayed is price increases. See below for the details.
As most of the country begins to shake off the historical cold stretch in early February, the construction industry seems to be following suit. The hope of warming weather and spring starts have had an impact on material demand levels and thus resulted in some commodity items taking on price increases.
The largest movement has come within the lumber market. After a noteworthy low demand over the end of 2018 and into January 2019, lumber demand rebounded in early February. Availability and pricing on both plywood and dimensional lumber took off the first week of February. Pricing was changing almost daily as mills and brokers reacted to the sudden influx of demand following the prior three month’s low. Lumber pricing seems to have steadied some in the past few days, with increases not being as dramatic as they were two weeks ago. The low pricing of winter has passed and we can expect lumber pricing to continue to creep up over the next few months.
Rebar and metal wire reinforcing again stayed level from January through the beginning of February. Expectations remain positive for 2019 with demand levels anticipated to stay strong throughout the year. Scrap pricing is expected to firm up with the warmer weather and increased demand, so we can expect metal prices to stay consistent in the short term and begin to slightly rise moving into spring. Mills are currently operating with moderate stock on hand from winter production, so any high run on demand could quickly deplete those stocks, limit availability, and increase the chance of a moderate price increase.
See below a few other manufacturers of construction materials who have announced price increases for the coming months.
Laticrete, a manufacturer of construction chemicals and floor repair products, announced a price increase effective March 1, 2019. This increase ranges between two and eight percent across all product categories. Laticrete listed the significant increase in raw material costs as well as higher transportation costs as the reasons for the increase.
Dayton Superior Corporation has also announced a price increase effect March 1, 2019. This increase will be an on average of four percent increase across all accessory products, all forming related accessory products under the Symons brand, and all Dayton brand chemical products. A ten percent increase on brace rentals associated with new projects and existing projects will also be implemented.
Another forming material company, Gates & Sons, Inc., has announced a price increase. Effective March 1, 2019 Gates & Sons will increase pricing eight percent across the board and have an additional ten percent on the Cam Lock and Stiff Back Brackets. Tariffs, increased labor cost, and increasing cost of raw materials and delivery have driven the price increase.
The producer price index (PPI) for final demand in January, not seasonally adjusted, increased 0.6% from December and 4.9% year-over-year (y/y) from January 2018, the Bureau of Labor Statistics (BLS) reported on Thursday. AGC posted tables and an explanation focusing on construction prices and costs.
Click here for the latest update on the construction economy from Ken Simonson, the chief economist of the AGC.
The #1 Ranked Brand Name in Decorative Concrete Color, Texture and Performance Systems
A Worldwide Leader in Trench Drain Systems
Hohmann & Barnard
Hohmann & Barnard develops and manufactures building envelope products: masonry anchors, stone anchors, masonry reinforcement, masonry flashing, and more.
Our Associate Spotlight for February is of Shauna Chambers, an Accounts Receivable Specialist in our Accounting office in downtown Greenville. Shauna is from Winter Park, Florida where she graduated from Liberty Christian School. She is married and has two children. In her free time she enjoys spending time with her children, boating, and riding motorcycles. Prior to joining us she was with Guardian Building Products, Ryan/Taxaccord S, and Propel HR. Shauna has proven to be a great addition to our team.
Our management article for this month is, How to Prepare for the Next Recession. While, as I stated at the beginning of my letter, most “experts” don’t expect a recession this year it’s never too early to prepare. I hope you get some useful tips from this.
February’s Management Article
How to Prepare for the Next Recession
By Steve McKee
If you’re in your 20s, you probably remember the Great Recession through the eyes of your parents: the stress they brought home from work, the vacations that got cancelled, perhaps even the job that one or both of them lost.
If you’re in your 30s, you may have an advanced degree because of it — lousy times for jobs are great times to stay in school. If you’re in your 40s or 50s, it wasn’t the first recession you lived through, and you knew it wouldn’t be the last. And if you’re in your 60s or older, you may be still working because of it.
Death and taxes aren’t the only things that are inevitable; so are recessions. It seems one is always lurking around the corner. But a recession can be as helpful as it is unavoidable because it forces us to revisit our principles and reset our expectations. That’s a good thing.
Technically, the Great Recession lasted only a year and a half — from December 2007 to June 2009. Practically and psychologically, however, it lasted almost a decade. Late in 2009, we were all still reeling from its effects, so much so that my firm felt the need to launch a 90-day effort at FindYourNerve.com to encourage business leaders to keep their chins up. Re-reading some of the posts from today’s perspective offers a kind of macabre entertainment.
For example, on Oct. 1 of that year, I kicked things off by writing:
“The economy isn’t a shapeless, faceless, impersonal entity; the economy is us. And if each of us determines that we will right our own ships over the next few months—taking prudent risks, believing in our people and betting on recovery—the future we envision will be self-fulfilling. Then as the new year dawns and the days once again begin to grow longer, we can leave the long winter that was 2009 behind.”
Alas, we didn’t leave it behind. Not right away, anyway. Nine months later The Economist boldly proclaimed, “The American recession is over.” But it wasn’t, in my mind, or in the minds of most Americans. Uncertainty is a stubborn thing, and it lingered for years.
Well, buckle your seatbelt, because we’re again due for a decline. One of the last things I wrote at FindYourNerve.com was this: “I suspect that in a decade or two, when any of us pause for a moment to reflect on our careers, we’ll view the events of 2009 as among our greatest learning experiences.” Unlike the hopes I expressed in my first post, that statement has proven true. As we anticipate the dawning of a new downturn, I offer you four hard-won lessons.
Lack of alignment is the most sinister problem we see in companies that are struggling against the tide. If you’re not pulling together, you’re pulling apart, and even the best strategies are ineffective if they’re not being fully executed. During the Great Recession, my business partners and I regularly looked into each other’s eyes and took inventory of where we stood. If there was any division, we addressed it. Immediately. A tornado is no time for a family feud. You have to keep everybody in the shelter together.
Even in good times, it’s tempting to chase business you normally wouldn’t, but that’s especially true when the top line is in decline. Recessions can be clarifying moments in the sense that they cause us to question our assumptions, re-evaluate our strategy and recommit to (or modify) our plans. Just make sure to view your short-term goals through a long-term lens. When things turn back up, you don’t want your company to have become something it’s not.
You can save your way to survival, but not to success. Sure, you may have to trim your budget, and the easiest places to do so are where you don’t feel immediate pain, such as marketing, R&D and training. But even if it doesn’t hurt today, that doesn’t mean you’re not damaging tomorrow, so be careful where and how much you cut. And don’t forget that when everyone else is selling, Warren Buffett is buying. The best time to gain share is when your competitors are loosening their grip on it.
Stay the course
Dollar-cost averaging is a strategy by which you invest a fixed amount of money at regular intervals over a long period of time. It works because your money buys the most precisely when you’re least inclined to invest. What’s true for your retirement plan is true for your company: There’s no replacement for showing up every day, rain or shine, and keeping at it. Every time you start over, you’re starting over, and a silver bullet will never beat a steady aim.
Four simple lessons. All hard won. All proven over time. And all, by the way, backed up by significant research. Consider them now, before the storm hits, and you’ll be better prepared for when it does.
None of us can say exactly when the next recession is going to begin, or how long it will last. But all of us know it’s coming. We have no excuse not to prepare.
In closing, once things dry out keep us in mind for your building material needs. We appreciate your business.
Connect with us: Twitter | YouTube | Facebook | LinkedIn
Author of The Real Business 101: Lessons From the Trenches
Get your copy below.
For Smashwords (eBook version for Kindle, iPad, Nook) click here
For direct link to Amazon site (Kindle and print version) click here