The Building Tradesman Newspaper

Friday, July 06, 2012

Modest 2% gain projected for entire 2012 construction

By The Building Tradesman

While the U.S. construction industry has been spinning its wheels for much of the first half of the year, the second six months should help the industry gain 2 percent in activity vs. 2011.

That prediction came on June 27 via the McGraw-Hill Construction “Midyear Update Projection.”

The report said: “While slightly better than the flat performance for 2012 construction starts predicted last fall, the updated forecast still portrays an industry struggling to gain upward momentum.”

Dollar-wise, the anticipated uptick would result in the spending of $445 billion in U.S. construction in 2012, vs. $434 billion in 2011.

“The construction industry has yet to move from a hesitant up-and-down pattern to more sustained expansion,” said Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “After plunging 23 percent in 2009, new construction starts edged up only 1 percent in 2010 and were unchanged in 2011, so the modest 2% increase predicted for 2012 is really more of the same.

“The backdrop for the construction industry remains the fragile U.S. economy, which continues to see slow employment growth, diminished funding from federal and state governments, and the uncertainty related to the U.S. fiscal stalemate and the European debt crisis. On the plus side, energy costs are now receding, interest rates are very low, and lending standards are beginning to ease for commercial real estate development.”

McGraw-Hill said the construction market this year continues to see a mix of pluses and minuses by major sector, as follows:

  • Single-family housing in 2012 will advance 21 percent.
  • Multifamily housing in 2012 is projected to climb 19 percent.
  • Commercial building in 2012 will grow 10 percent, following a 12 percent gain in 2011.
  • The institutional building market in 2012 will fall an additional 10 percent, after sliding 11 percent in 2011. The tough fiscal environment for states and localities continues to dampen school construction, and the uncertain economic environment is restraining healthcare facilities.
  • The manufacturing building category in 2012 will retreat 20 percent, following a 75 percent jump in 2011.
  • Public works construction in 2012 will slide a further 6 percent, after last year’s 14 percent decline. This reflects government spending cuts and the absence of a multiyear federal transportation bill.
  • Electric utility construction in 2012 will essentially hold steady with its exceptionally strong 2011 amount, helped by this year’s start of two large nuclear power projects.