Dive Brief:
- The Associated Builders and Contractors has predicted that nonresidential construction sectors are headed for slower growth in 2017, but improvements in the overall economy should spur an expansion of construction spending (+3.5%) and jobs.
- Rising commodity and energy costs, as well as an increase in construction wages in the wake of a 10-year high in job openings, could lead to flat construction spending if contractors aren’t ready for the higher outlays in operating expenses.
- A potential bright spot for the construction industry is the fact that the age of U.S. fixed assets is an average of 23 years old, so the time for replacement is fast approaching.
Dive Insight:
ABC Chief Economist Anirban Basu said that despite the slight change in the construction environment, companies are still staying busy — even if they’re not as optimistic as they have been in recent years. Most firms also expect to still see hikes in revenues, margins and hiring.
According to the most recent ABC Contractor's Construction Confidence report in October, industry expectations were down from its previous report in April, but companies said they were still experiencing growth. In the area of sales, optimism fell from 67.0 to 64.1 on the CCI, and contractors projected their profit margins would fall slightly. Estimated hiring, however, was up one full point to 64.9. The ABC said despite the slight downturn in expectations for sales and profits, the above-50 numbers across the board signaled that contractors overall were foreseeing growth.
The 2017 Dodge Construction Outlook from Dodge Data & Analytics also indicated a slight slowdown in nonresidential construction, but not until 2018. However, Robert Murray, Dodge chief economist, said the slow nature of the recovery during the last few years means that the industry shouldn't have to endure a crash scenario.
