ConstructConnect lowers 2016 starts forecast — but raises 2017 projections

Dive Brief:

In its fourth-quarter forecast, construction research and reporting company ConstructConnect revised its 2016 construction start projections down from 7.9% to 6.2% but raised its 2017 expectations from 6.2% to 6.8%.
Although ConstructConnect reported that 2016 nonresidential starts were better than expected, overall starts were held back by the residential sector, which has suffered from the fallout of unpredictability around the U.S. presidential election's outcome. Through 2020, however, single-family starts are expected to rise at twice the pace of multifamily, potentially boosting the entire residential category.
While ConstructConnect's fourth-quarter predictions were pulled down by residential's weak third-quarter performance, the research firm reported that private office building, parking garage and healthcare construction was stronger than expected.

Dive Insight:

Residential's 2017 comeback will be powered by increasing incomes, continuing low mortgage rates and pent-up demand. However, while millennial renters-turned-homeowners and overall increased "purchasing power" will drive residential growth, the sector is still not expected to reach the precession heights of 2005.

In addition to the election, "waffling" from the Federal Reserve about its interest-rate plans has also created an environment of uncertainty, according to ConstructConnect Chief Economist Alex Carrick. He also said the prolonged economic recovery has led to concerns about its ability to continue at such a relatively slow pace.

For the most part, ConstructConnect's predictions line up with the 2017 Dodge Construction Outlook from Dodge Data & Analytics. Like ConstructConnect, Dodge Chief Economist Robert Murray said the continuing recovery is a more measured one rather than "a boom," with growth continuing through 2018.

He said factors that should play a role in the industry in the next year include increased infrastructure spending, volatility in electric and gas plant construction and rising interest rates. Dodge predicted an overall increase in 2017 construction starts to be 5% and downgraded its 2016 starts from 6% growth to 1%.