Hardly riveting news in itself, but it could prove more significant to the health of corporate Britannia than you might imagine. That's because US construction is one of those genuine cannonading industries that's highly influential both within the domestic sphere and abroad. That influence extends well beyond equipment hire companies and UK construction firms with direct exposure to the US market, but through into the support services, chemicals, banking and insurance sectors - and, by definition, UK indices.
Despite prevailing uncertainties over the trajectory of US interest rates, the homebuilding and remodelling component - residential fixed investment (RFI) - as a share of US gross domestic product (GDP) expanded to 3.4 per cent in the three months to June; the highest quarterly rate for RFI in more than eight years. The construction industry's impact on US GDP has grown by more than a fifth since its low point in 2011, according to data from the US Bureau of Economic Analysis.
Further prevarication by the US Federal Reserve is likely to see housing demand oscillate, although recession-delayed work on roads, bridges and other infrastructure is also fuelling activity in the wider industry, but the danger exists that this might add up to little more than Capitol Hill's latter day take on 'pork barrelling'. It is election year after all, and successive administrations have routinely adjusted fiscal policies in a manner designed to expand economic activity just prior to a presidential vote and thereby win voter support for the incumbent party.
US construction month-on-month spending
Perhaps a more illuminating insight into the state of the construction industry is provided through the ratio of construction job openings to hiring, as measured by the US Department of Labour, which has reached its highest level since 2007. One in three construction workers in the US was forced to down tools in the wake of the housing bust, but now housebuilders across the country are struggling to hire workers at all levels of experience, according to a press release from the National Association of Homebuilders. The association estimates that there are around 200,000 unfilled construction jobs in the US - a jump of 81 per cent in the past two years. In 43 states, construction is now contributing more to the economy than it did in 2010, creating a demand for skilled workers across the country.
The turnaround matters from a global perspective, driving aggregate demand and feeding through into earnings. A sustained rebound in US construction starts has become all the more critical due to doubts over the effectiveness of China's stimulus programmes. China's continued expansion provided the keystone for the 'Global Construction 2020' report, a major study into construction, sponsored by global advisory firm PwC, which predicted that global construction would grow by 67 per cent from $7.2 trillion to $12 trillion by 2020. Growth in China, India and the US is forecast to generate 54 per cent of the $4.8 trillion increase in global construction output, with the resumption of growth marked by an acceleration of regional economic trends that were taking place prior to the financial crisis.
For many investors, the report's forecasts would seem to be tinged with wishful thinking but, then again, who would have predicted the rebound we've witnessed in Ireland's construction industry? And doubts over the expansion of China's building programmes are just that - doubts. Strategic investments in infrastructure are still being generated through the government's One Belt One Road project that aims to connect China to Europe via both inland and maritime routes in a modern version of the antique 'silk road' trade routes.
