Construction Industry Forecast
February 6, 2012
Industry Intelligence from First Research, a division of Hoover's (a D&B company)
First Research forecasts are based on INFORUM forecasts that are licensed from the Interindustry Economic Research Fund, Inc. (IERF) in College Park, MD. INFORUM's "interindustry-macro" approach to modeling the economy captures the links between industries and the aggregate economy.
Commercial and Heavy Construction Spending Growth Slows After Spike
The value of US new public and private nonresidential and nonbuilding construction spending is forecast to grow at an annual compounded rate of 7 percent between 2011 and 2016. Data Published: October 2011.
Residential Construction Growth Robust
The value of US new residential home construction and renovations is forecast to grow at an annual compounded rate of 12 percent between 2011 and 2016. Data Published: October 2011.
QUARTERLY INDUSTRY UPDATe
Nonresidential Construction Spending Flat - US spending for nonresidential construction fell 0.1 percent in November 2010 compared to the same period in 2010, but increased nearly 1 percent compared to October 2011. On a year-over-year basis, nonresidential construction spending declined in November in all but four of 16 categories. Spending growth was strongest in the manufacturing and commercial sectors, which rose 13.3 percent and 11.4 percent, respectively. Construction spending in the power sector rose 6.5 percent, and educational spending grew 3.9 percent. Religious and conservation and development spending fared the worst, as both dropped more than 23 percent. Although spending has been improving for some time for privately funded projects, projects in the public sector continue to be challenged by cash-strapped state and local budgets, according to Associated Builders and Contractors.
Report Highlights Risk of Skyscraper Boom - A recent report by Barclays Capital suggests the spate of skyscraper construction projects in China and India could signal an impending economic correction. The report points to the economic crises that followed similar building booms in the past, such as the Great Depression amid the completion of the Empire State Building and the Chrysler Building, and the oil crisis and economic stagnation of the 1970s while the Sears Tower and the World Trade Center were finished. Barclays Capital suggests the booms are a sign of excess credit and represent a misallocation of capital. China is now home to the largest number of skyscrapers, and is building more than half of those currently under construction worldwide. While India has relatively few extremely tall buildings, 14 are now under construction and one in Mumbai will be the second-tallest in the world.
Scattered Gains for Residential Construction - While still depressed nationally, residential construction activity has picked up in regional markets, according to the Chicago Tribune. Builders are seeing an uptick in activity in Raleigh, North Carolina; Austin, Texas; and Omaha, Nebraska; among other markets. Experts said that some metro areas weathered the recession better than others, and those with fast-growing populations have a higher need for new housing. Builders are also benefiting from the demand for multifamily housing, caused in part by restrictions on financing for single-family home purchases.
Lumber Prices Increase - US producer prices for softwood lumber, a key material cost for residential construction contractors, rose 5.1 percent in October 2011 compared to the same month in 2010, marking the third consecutive monthly year-over-year increase. In British Columbia, lumber prices exhibited an unexpected increase in November 2011 as US builders tried to rebuild low inventories in advance of the spring construction season, according to the Vancouver Sun. The price hike was also spurred by increased apartment construction activity and a rise in the number of building permits. Experts say that prices should remain stable or continue to rise into 2012, an indication of increased demand.