The Economy’s Impact on the Construction Industry in 2024
Dr. Anirban Basu, Chief Economist for SMACNA, shares some predictions for the upcoming year
(Courtesy of SMACNA)
Contractors are slated to have a busy 2024, but there are many things could impact the industry, says Dr. Anirban Basu, Chief Economist for SMACNA. Basu shared some of his industry insights with Seth Lennon during the SMACNA Annual Convention. Here’s what he had to about the economy’s impact on the industry.
“Construction activity is not so much driven by economic growth — that’s a factor — but by economic transformation. And that’s what we see right now. We have growth, but even more so we have transformation,” said Basu, who sat down with Seth Lennon at the SMACNA Annual Convention to discuss 2024 predictions.
Contractors are expected to be busy on many projects in the realm of artificial intelligence, e-commerce, and the reshoring of supply chains in the United States. There’s plenty of work, but there’s also uncertainty as we head into 2024 — from the 2024 presidential election to the conflicts between Israel and Palestine, and Russia and Ukraine to North Korean missile testing.
“My guess is the world is so fraught with risk that something is going to break. Is it that oil prices are going to take off for $150 a barrel right now they're on $90 a barrel? I don't know. But it feels like a really tense road right now that something could explode at any moment,” Basu said. “And I'm worried about those black swan risks, those black swan events, low probability events, and it turns out they're black swans in nature, they're low probability but they exist. A black swan event is an event that is of civic significant magnitude, such that it affects financial markets and barter economies. 911 is a classic black swan event, so is COVID. What black swan events are in front of us, it seems that there are many possibilities.”
Inflation, while it has decreased, has still left prices “stubbornly high,” he said. People are being forced to pay higher prices and this puts pressure on both businesses and households.
“And eventually, again, one would think that something's going to break, that consumers cannot deal with these high prices forever,” Basu said. “So far, they've navigated that but at some point, one would think this has got to end.”
Basu predicts that we are headed into a recession. “Americans can’t keep spending this way, businesses can’t be spending this way, can’t keep hiring this way and eventually we find way into a recession at some point in the next months. That’s my forecast,” he says.
With that in mind, as we enter 2024, Basu offers the following advice to contractors:
Don’t be complacent. “It’s not time for complacency. It’s not time for the status quo. It’s time to embrace the risk and deal with it aggressively.”
Be cautious with cash flow. “Set aside more cash and reserves right now and think about workforce,” he suggests. Consider who needs to be part of the team. Not every hire you’ve made has been a superstar hire.
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