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Sunday, January 26, 2014
THE US ECONOMY IS EXPECTED TO GROW BY UP TO 3% THIS YEAR – BUT WHAT DOES THIS MEAN FOR OUR INDUSTRY?
For the last few years (since 2009), a number of forecasters have predicted economic growth in the US at the start of the year, but have subsequently been undone by events.Although not everyone agrees, it now looks as if we will finally see the economy growing in 2014, by maybe as much as 3%. While not conclusive, there are a number of signs of a recovering economy. Unemployment is down (but only to 7%), consumer spending is rising and there is a revival in the manufacturing sector.
The housing market in particular is recovering. Builders started work on 20% more single-family houses in the first 11 months of 2013 than in the year-earlier period and home prices are at all-time highs in 10 of the 50 largest metro markets.
So, what does this mean for the construction industry?
McGraw Hill predicts that total U.S. construction starts for 2014 will rise 9% to $555.3 billion, with three very strong sectors - single family housing (24% increase in units), multifamily housing (9% rise in units) and commercial building (up 17%,) led by warehouses and hotels. In contrast, public works construction will drop 5% and electric utility construction will retreat by a massive 33%.
Not everywhere is likely to be so buoyant. Although the outlook for construction is generally positive, bright spots will be particularly evident in some of the hardest hit areas of the Great Recession. The residential market is improving where it was hit the hardest and geographic areas with oil and gas shale formations are experiencing energy-related growth.
Mainly good, then, but with construction employment beginning to approach 6 million workers, there are now stories in the financial and trade press of trade labor shortages slowing down projects. With a failure to improve productivity like we have seen in industrial and retail sectors, there is increasing demand for technology to be incorporated into the construction process.
We at RLB expect to see the construction industry continue to improve through the year driven by post-recession 'catch-up' and investment inflows from overseas (especially China).
posted by The QS