The Building Tradesman Newspaper

Friday, November 04, 2016

Outlook: U.S. construction primed for better times in 2017

By The Building Tradesman

U.S. construction starts will advance 5 percent to $713 billion in 2017, following an expected 1 percent gain in 2016 and an 11 percent hike in 2015.

That look ahead comes from Dodge Data and Analytics, which issued its annual prognostication on Oct. 20 for U.S. building for the year ahead. As 2016 winds down, Dodge said the month-to-month declines in construction activity has lessened, "easing concern that the construction industry may be in the early stage of cyclical decline."

“The U.S. construction industry has witnessed signs of deceleration in 2016, following several years of steady growth,” said Robert Murray, chief economist for Dodge Data & Analytics. “Total construction starts during the first half of this year lagged behind what was reported in 2015, raising some concern that the current construction expansion may have run its course.

"However, the early 2016 shortfall reflected the comparison to unusually elevated activity during the first half of 2015, lifted by 13 very large projects valued each at $1 billion or more..." Murray said. "The construction industry has now entered a more mature phase of its expansion, one that is characterized by slower rates of growth than what took place during the 2012-2015 period, but still growth. Since the construction start statistics will lead the pattern of construction spending, this means that construction spending can be expected to see moderate gains through 2017 and beyond.”

Murray said there are a number of "positive factors which suggest the construction expansion has room to proceed." He said the U.S. economy in 2017 overall is anticipated to see moderate job growth, market fundamentals for commercial real estate should remain generally healthy, and more funding support is coming from state and local bond measures. He said although the global economy in 2017 will remain sluggish, energy prices appear to have stabilized, interest rate hikes will be gradual and few, and a new U.S. president will have been elected.

Broken down by category, 2017 gains are expected for both residential and nonresidential construction (+8 percent), while nonbuilding construction (generally infrastructure work) will slide 3 percent. Commercial building will increase 6 percent on top of the 12 percent gain estimated for 2016. Institutional building will advance 10 percent, resuming its expansion after pausing in 2015 and 2016.

Manufacturing plant construction will increase 6 percent, beginning to recover after steep declines in 2015 and 2016. Public works construction will improve 6 percent, regaining upward momentum after slipping 3 percent in 2016.