Construction Market May Grow in 2013

Nov. 2, 2012
Uncertainty over the Presidential election and concerns over solutions about the “fiscal cliff” have tamped down enthusiasm in the construction market, according to Robert Murray, McGraw-Hill Construction’s Vice President of Economic Affairs.

Uncertainty over the Presidential election and concerns over solutions about the “fiscal cliff” have tamped down enthusiasm in the construction market, according to Robert Murray, McGraw-Hill Construction’s Vice President of Economic Affairs.

At McGraw-Hill’s 2013 Construction Forecast, held Oct. 23-24 in Washington D.C., economists gave construction execs a snapshot of an industry that’s moving slowly but surely in the right direction despite the current air of uncertainty blanketing the economy. That being said, growth is coming from increases over historic lows in many segments of the construction industry. McGraw-Hill’s benchmark 2013 Dodge Construction Outlook forecasts total U.S. construction starts for 2013 will rise 6% to $483.7 billion, slightly higher than the 5% increase to $458 billion estimated for 2012.

“As reported by McGraw-Hill Construction, new construction starts in 2010 edged up 2%, followed by another 1% gain in 2011, and 2012 is headed for a 5% increase to $458 billion, said Murray. “This still leaves the volume of total construction starts 32% below the 2005 peak on a current dollar basis, and down about 50% when viewed on a constant dollar basis. “The modest gains experienced during the past two years have in effect produced an extended bottom for construction starts, in which the process of recovery is being stretched out.

“The fiscal cliff poses a significant downside risk to the near-term prospects for the U.S. economy and the construction industry. Assuming that efforts to cushion the full extent of the fiscal cliff are successful next year, keeping the U.S. economy from sliding back into recession, then there are several positive factors to benefit construction, including low interest rates and improving market fundamentals for several project types.”

Murray provided the following 2013 forecasts for key segments of the construction market: single-family housing: $153.1 billion (+24%); multi-family housing: $40.3 billion (+16%); commercial buildings: $55.9 billion (+12%); institutional buildings: $86.6 billion (no change); manufactured buildings: $12.8 billion (+8%); public works: $100 billion (-1%); and electric utilities: $35 billion (-31%).

Beth Ann Bovino, U.S. senior economist at Standard & Poor’s, echoed Murray’s take on the slow economic recovery. “A recovery has begun, but it’s likely to remain weak. Three-percent growth after a recession ends is half of what you usually see.”

She said despite the double-digit increase in housing starts, they are still at half of what you would normally expect to keep up with demand, but double what they were during the recession. Like the other economist who spoke at the conferences, Bovino expects Congress to avoid the fiscal cliff. But she says if nothing is done the U.S. economy could fall into recession.