Ready Mixed Concrete As An Economic Indicator

Statistics New Zealand produces a lot of cool data series accessible via Infoshare. One favourite of mine in relation to construction economics is quarterly ready mixed concrete data. You can break it down by region, but the chart above shows total New Zealand production from Q1 2001 to Q4 2012.

Why would ready mixed concrete be a good indicator of activity in the construction sector? Well, ready mixed concrete is used in almost every construction project imaginable. Residential housing slabs, commercial building slabs, farm culverts, heavy drainage and more.

This chart clearly shows how ready mixed concrete has tracked the depression of the construction sector since 2007. It is still 1/3 off its peak quarterly numbers in 2004 through 2007 when construction really was booming.

The reason that construction is important is because it functions as a massive sponge for low to medium skill employment. When construction is booming, a lot of low marginal product workers end up as labourers on construction sites. The ones who work hard can end up earning very good wages as leading hands or supervisors once they’ve gained experience working with different materials and on complex building projects.

If you are wondering why the government’s rhetoric around construction is completely different to what people who actually work in construction are actually experiencing (i.e. we are in the worst recession since the early 1990’s if not worse), then data like this functions as a fact check that shows what subcontractors are saying is closer to the truth.

The lack of rebound in ready mixed concrete is even more disturbing when you realise that New Zealand’s population has increased by more than 570,000 people since Q1 2001. That means per capita ready mixed concrete will be even lower now – not good when you think about smaller family sizes and the corresponding need for vast increases in housing stock that will require vast amounts of ready mixed concrete production.