Sources: Dodge Data & Analytics, New York; CP staff
The 2019 Dodge Construction Outlook predicts that total U.S. construction starts will be $808 billion, essentially even with the $807 billion estimated for 2018. By major sector in dollar terms, residential building will be down 2 percent, nonresidential building will match its 2018 amount, and non-building construction will increase 3 percent.
“Over the past three years, the expansion for the U.S. construction industry has shown deceleration in its rate of growth, a pattern that typically takes place as an expansion matures,” Dodge Chief Economist Robert Murray told attendees of the 80th annual Outlook Executive Conference in National Harbor, Md. “After advancing 11 percent to 14 percent each year from 2012 through 2015, total construction starts climbed 7 percent in both 2016 and 2017, and a 3 percent increase is estimated for 2018.
“There are mounting headwinds affecting construction, namely rising interest rates and higher material costs, but for now these have been balanced by the stronger growth for the U.S. economy, some easing of bank lending standards, still healthy market fundamentals for commercial real estate, and greater state financing for school construction and enhanced federal funding for public works.”
“An important question going into 2019 is whether deceleration is followed by a period of high level stability or a period of decline,” Murray observed. “For 2019, it’s expected that growth for the U.S. economy won’t be quite as strong as what’s taking place in 2018, as the benefits of tax cuts begin to wane. Short term interest rates will rise, as the Federal Reserve continues to move monetary policy towards a more neutral stance. Long-term interest rates will also rise, reflecting higher inflationary expectations by the financial markets. At the same time, any erosion in market fundamentals for commercial real estate will stay modest. In addition, the greater funding from state and local bond measures passed in recent years will still be present, and it’s likely that federal spending for construction programs will increase once all the federal appropriations bills for fiscal 2019 are finalized. In this environment, it’s forecast that growth for construction starts will decelerate further, but not yet make the transition to the point where the overall volume of activity declines.”
Copies of the 2019 Dodge Construction Outlook with additional details by building sector can be ordered here or from Dodge Data & Analytics, 800/591-4462.