Cause & effect

By Lauren Duensing

July 2013 - From supporting small businesses to buying local produce, there are messages everywhere that encourage consumers to consider the impact of their purchasing decisions both within their neighborhoods and the larger economy. Even a small contribution can bring exponential increases. 

I received an economic impact report recently from the Aluminum Association, Arlington, Va., that illustrated the interconnectivity between markets. According to the report, aluminum’s impact on the national economy includes 463,000 direct and indirect jobs produced and $31.8 billion value of annual output/shipments. 

“The aluminum industry directly creates 106,000 jobs, $6 billion in payroll and $1 billion in capital expenditures in the United States each year,” according to numbers from the Aluminum Association. “For each job the industry creates, an additional 3.4 jobs are created elsewhere in the economy.” In addition, 4 million U.S. manufacturing jobs depend on aluminum products. 

Another industry that has a big ripple effect on the overall economy is construction. Since the downturn, construction has been the market slowest to recover. However, it seems to have finally turned a corner. 

Today’s residential real estate market has plenty of buyers but extremely low inventories, which means many properties are getting snapped up as soon as they get posted. However, as sellers decide to take advantage of the market and builders restart or begin projects, these shortages have started to ease. Data from Zillow indicate overall listings are down 12.2 percent year on year, a 5.3 percent increase from the 17.5 percent reported in January. Phoenix, San Diego and Minneapolis had the greatest percentages of inventory improvement among metro areas, while inventory constraints tightened the most in Las Vegas, Chicago and Washington, D.C.

“As the recovery has progressed, inventory constraints have played a major role in rapidly pushing up home values in many areas, as increasing demand for homes ran headlong into limited supply. It has always been just a matter of time before more supply came on the market to meet this demand as home builders built more new homes and sellers entered the market to capitalize on recent robust appreciation in their own homes,” said Stan Humphries, Zillow chief economist, in a statement. 

“Inventory will likely remain below year-ago levels for a while yet, as builders ramp up capacity and sellers wait to squeeze every drop of equity from their home before listing,” Humphries continued. “But a corner has been turned. Going forward, as this new supply makes its way to market, we expect the pace of home value appreciation to slow down from unsustainably high annual levels of 5 percent or above to more moderate levels closer to historic norms of 3 percent or 4 percent.”

Nonresidential building also is improving. According to McGraw Hill Construction, a division of McGraw Hill Financial, the Dodge Momentum Index rose 3.6 percent in May from the previous month. The index has risen for six consecutive months, which is the longest period of increases since 2006. “The uncertainty surrounding new development appears, for now, to have dissipated, and the climate for nonresidential building projects is gaining strength as the planning pipeline grows more active,” noted McGraw Hill Construction in a press release. 

In next month’s edition of Modern Metals, we’ll provide a more in-depth look at the market in our annual OEM report on heavy equipment and construction. MM

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