Residential Construction Industry Marches on Washington
More than 700 builders, remodelers and associates engaged in all facets of residential construction marched on Capitol Hill to call on Congress to take steps to ease the nation’s housing affordability crisis and make housing and homeownership a national priority. Members came to be part of NAHB’s 2023 Legislative Conference to reinforce how vital a healthy housing industry is to the economy.
With a nationwide shortage of 1.5 million housing units, NAHB maintains that building more homes is the only practical way to tame inflation, satisfy unmet demand, achieve a healthy supply-demand balance in the for-sale and rental markets, and ease the nation’s housing affordability crisis.
Housing advocates had more than 250 individual meetings with their representatives and senators, urging lawmakers to act on three important issues:
NAHB is asking Congress to address the nationwide shortage of distribution transformers. The shortage is delaying housing projects across the nation and the cost of transformers has soared by more than 70% over the past three years. NAHB is urging Congress to use whatever means necessary to boost output at existing facilities and oppose efforts by the DOE to increase energy conservation standards for the production and distribution of transformers.
NAHB is also urging the Senate to repeal $1 billion in grants to state and local governments to adopt more restricting and stringent energy codes.
The shortage of more than 400,000 workers in the construction industry is creating many issues, including housing construction delays and higher home building costs. NAHB is urging Congress to reauthorize the Workplace Innovation and Opportunity Act to help meet the residential construction industry’s severe workforce needs and to fully fund the Job Corps program, which is a vital source of skilled labor for the industry.
Companies Buying Less from China
US companies are stepping up their efforts to reduce their dependence on Chinese suppliers even as officials in Beijing and Washington work to stabilize relations. Through the first five months of this year, US imports from China were down 24% from the same period in 2022, according to the Census Bureau.
Companies such as Stanley Black & Decker, HP and Lego were cited as some of the companies that have been repositioning their supply lines for American consumers, either to avoid the risk of being pinched between rival superpowers or as part of a longer-term strategy to produce goods closer to customers.
Big retailers such as Walmart and Target are also ordering fewer goods from China as they work to pare down the excess inventories accumulated during the pandemic.
Wages for Chinese factory workers have risen, eroding one of the country's competitive advantages. US tariffs on roughly two-thirds of Chinese goods that were imposed during the previous administration have cut into new orders. Chinese President Xi Jinping's state-centric economic strategy, related crackdowns on private companies and chilly relations with Washington have further dampened commercial ties, according to analysts.
Chinese products account for roughly 1 out of every 6 dollars Americans spend on imports, down from nearly 1 in 4 before the pandemic, according to Oxford data. Japan also is buying less from China. But some European countries are standing pat.
Foreign investors are building fewer new Chinese factories, suggesting that other Asian countries will keep increasing their share of US imports at China's expense. Annual spending on new or "greenfield" sites in China fell from about $100 billion in 2010 to $50 billion in 2019 and hit just $18 billion last year, according to Oxford data.
Some Chinese companies have moved out of China to dodge US tariffs, while others send their products to third countries for a modest amount of final processing that obscures their Chinese origins. As a result, some products once made by Chinese companies at factories in China now arrive in the United States from Chinese factories in Mexico or Vietnam.
Earlier this year, Mexico became the United States' top trading partner, as manufacturers increasingly favored regional supply networks rather than global ones. Mexico, Canada and China have taken turns occupying the No. 1 spot since the start of the 2018 trade war.
Vietnam and Thailand have emerged as leading alternatives for companies looking to diversify out of China while staying in the neighborhood. India is attracting attention from manufacturers such as Apple, which plans to beef up its production of iPhones there.
China remains the world's factory, accounting for 31 percent of global manufacturing value added, compared with 17 percent for the second-ranked United States.
GDP Forecast Strong
GDP will grow a robust 5.8% in Q3, according to the Atlanta Federal Reserve's most recent GDPNow forecast. The previous forecast of 5% growth was upwardly revised after increases in new home construction and industrial production were reported in July. GDP expanded at 2.4% in the second quarter and 2% in Q 1. Analysts continue to believe the maximum sustainable growth is about 1.8%. Even though interest rates have been going up, economists say that higher borrowing costs alone rarely hamstring an economy.
The job market remains robust; most Americans who want a job can find one and companies are still hiring. The unemployment rate remains near a 55-year low and wages are rising faster than inflation for the first time in several years.
The main engine of the economy, consumer spending, remains strong. The government is also still spending lots of money on defense as well as subsidies for green energy and high tech. Spending may slow toward the end of the summer and the manufacturing side of the economy may slump.
Historically, the Atlanta Fed errs on the side of optimism. Another closely followed estimate by S&P Global puts GDP on a 2.4% rate of growth. The S&P forecast is one of the gold standards on Wall Street DJIA. Some economists are still sticking to previous forecasts showing the start of a recession by early next year, which traditionally would mean two consecutive quarters of negative GDP growth.
Sunbelt is Booming
Two-thirds of all job growth in the country is now concentrated in the Southeast, home to 10 of the 15 fastest-growing cities, six of which are in Texas. Both Tennessee and Florida increased their GDP by 3.5% in the last financial quarter, according to the Bureau of Economic Analysis, and the state economies of Texas and Georgia also outperformed the US economy. The change in economic activity reflects the migration of workers to the sunbelt in search of better weather and more space after experiencing the cramped conditions of cities like New York during lockdowns. Southern states also lifted lockdown measures faster, luring away people living in the northeast who were tired of CV19 restrictions. Around 2.2 million people migrated to Florida and across the Southeast in the past two years.
INFORM Consumers Act Takes Effect
The INFORM Consumers Act, which took effect in July, aims to limit illegal sales and counterfeit products on the internet. INFORM requires companies to verify and disclose information about their high-volume third-party sellers, defined as anyone who sold 200 items or more totaling at least $5,000 in the past 12 months. These third-party sellers must submit verifiable information, such as a government-issued ID, bank account number, working email and phone number and taxpayer identification number. Sellers with sales of more than $20,000 a year will also have their full name and physical address listed on their product-listing page, along with contact information. Because the legislation does not make the hosting company, such as Amazon or Walmart, liable for third-party sellers, it is supported by all the big players.
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