Don’t Expect Big ‘Bounce’ In U.S. Economic Recovery

RALEIGH, NC — According to FMI’s Construction Outlook, Second Quarter 2002 Report, “Improving economic conditions, unseasonably warm weather this winter, and increased government spending have helped bolster the construction industry during the past six months. But these results may not represent changes in the underlying factors that determine the direction of the construction market.” The underlying factors point to construction expansion later, in 2003.

Timothy D. Aylor, FMI construction economist, noted, “The U.S. economy appears to be recovering from the second-mildest recession on record.

“But since there hasn’t been a very large drop-off in consumer spending or employment during this recession, there likely won’t be a big ‘bounce’ or jump in economic activity upon recovery. In addition, unstable oil prices threaten to hold the recovery back just as it is leaving the starting gate.”

He continued, “The U.S. construction economy has been a pleasant surprise to many because it has proven to be resilient to rising layoffs and wavering consumer confidence levels during the past year. Unfortunately, underlying drivers such as home affordability, office vacancy rates, and industrial capacity-utilization rates are not likely to be as favorable for the remainder of the year. But look for a healthy rebound in many building sectors in 2003.”

Regarding residential construction, Aylor stated, “Coming off what was in many ways a record-breaking year in residential real estate, many residential builders would gladly accept a year of strong sales that didn’t quite match the pace of 2001. That scenario is likely to be what comes about.”

Looking at the nonresidential market, he added, “It will likely be several years before we see the rates of commercial investment like those found in the late 1990s.”

Publication date: 06/24/2002

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