Associated Builders and Contractors (ABC) Chief Economist Anirban Basu predicts stability for the construction industry’s economy and expanding nonresidential construction spending in 2018. While construction project backlog and contractor confidence remain high heading into the new year, Basu warns there are risks to the 2018 outlook as a number of potential cost increases could come into play.
“With wage pressures building, healthcare costs surging and fuel prices edging higher, inflation is becoming more apparent,” Basu said. “That could translate into some meaningful interest rate increases in 2018, which all things being equal is not good for construction spending. The stock market’s performance has been simply brilliant. But what goes up can go down.”
Basu added that asset prices might head in a different direction in 2018, including commercial real estate prices. Segments like hotels, office buildings and apartments have helped to fuel construction spending in recent years. If the value of properties begins to stagnate or worse, construction spending momentum will eventually wind down. The impact of this may not be felt in 2018, however, but in out years, Basu said.
“For now, there is plentiful momentum,” said Basu. “A recent reading of the Conference Board’s Index of Leading Economic Indicators suggests that the U.S. economy will enter 2018 with substantial momentum. Corporate earnings remain healthy. Global growth is accelerating. Consumers are upbeat. Tax cuts could fuel faster business spending. All of this suggests that the construction recovery that began in earnest in 2011 may have a few more birthdays ahead.”
Read Basu’s full 2018 construction economic forecast in Construction Executive magazine. You can also listen to Basu talk about his forecast in a recent webinar.
Visit ABC Construction Economics for the Construction Backlog Indicator, Construction Confidence Index and state unemployment reports, plus analysis of spending, employment, GDP and the Producer Price Index.
Related Stories
Data Centers | Jan 28, 2016
Top 10 markets for data center construction
JLL’s latest outlook foresees a maturation in certain metros.
Market Data | Jan 20, 2016
Nonresidential building starts sag in 2015
CDM Research finds only a few positive signs among the leading sectors.
Market Data | Jan 20, 2016
Architecture Billings Index ends year on positive note
While volatility persists, architecture firms reported healthy performance for 2015.
Market Data | Jan 15, 2016
ABC: Construction material prices continue free fall in December
In December, construction material prices fell for the sixth consecutive month. Prices have declined 7.2% since peaking in August 2014.
Market Data | Jan 13, 2016
Morgan Stanley bucks gloom and doom, thinks U.S. economy has legs through 2020
Strong job growth and dwindling consumer debt give rise to hope.
Hotel Facilities | Jan 13, 2016
Hotel construction should remain strong through 2017
More than 100,000 rooms could be delivered this year alone.
Market Data | Jan 6, 2016
Census Bureau revises 10 years’ worth of construction spending figures
The largest revisions came in the last two years and were largely upward.
Market Data | Jan 5, 2016
Majority of AEC firms saw growth in 2015, remain optimistic for 2016: BD+C survey
By all indications, 2015 was another solid year for U.S. architecture, engineering, and construction firms.
Market Data | Jan 5, 2016
Nonresidential construction spending falters in November
Only 4 of 16 subsectors showed gains
Market Data | Dec 15, 2015
AIA: Architecture Billings Index hits another bump
Business conditions show continued strength in South and West regions.