ABC Forecasts Construction Industry Growth
Organization forecasts growth in nonresidential construction spending of 7.4 percent
WASHINGTON — Associated Builders and Contractors (ABC) forecasts the U.S. commercial and industrial construction industries will continue their steady economic recovery in 2016. Despite a weak global economy, the industry’s solid economic recovery in 2015 should continue in 2016.
“As the mid-phase of the economic recovery continues, ABC forecasts growth in nonresidential construction spending of 7.4 percent next year along with growth in employment and backlog,” said Anirban Basu, chief economist, ABC. “The mid-phase of the recovery is typically the lengthiest part and ultimately gives way to the late phase, when the economy overheats. The current recovery could challenge the lengthiest recovery in U.S. history, which lasted 120 months between March 1991 and March 2001.
“Already, signs of overheating are evident, particularly with respect to emerging skills shortages in key industry categories such as trucking and construction,” continued Basu. “Despite that, average hourly earnings nationwide across all industries collectively are up only 2 percent in the past year, well below the Federal Reserve’s goal of 3.5 percent. There are also indications that certain real estate and technology segments have become overheated, with purchase prices rocketing higher and capitalization rates remaining unusually low.”
ABC’s leading indices each suggest that 2016 will be another solid year for the typical U.S. nonresidential construction firm, Basu said. “ABC’s Construction Confidence Index encompasses expectations with respect to hiring, profit margins, and projected sales growth. According to the most recent survey, overall contractor confidence has increased with respect to both sales [67.3 to 69.4] and profit margins [61 to 62.9]. And, while the pace of hiring is not expected to increase rapidly during the next six months, largely because of the lack of suitably trained, skilled personnel, the rate of new hires will continue at a steady pace.”
Additionally, ABC’s Construction Backlog Indicator signals strong demand during the months ahead, Basu noted. “According to the latest backlog survey, average contractor backlog stood at 8.5 months by mid-2015, with backlog surging in the western U.S. and the heavy industrial category.”
Basu’s full forecast is available at http://bit.ly/1k0hNEW.
Publication date: 1/11/2016