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Will 2018 Meet Expectations?

Will 2018 Meet Expectations?

By Greg Sitek

The future of the U.S. is shrouded in confusion, hostility, distrust, threats, uncertainty, criticism, discord, disasters, failing infrastructure, and an almost endless list of problems. But even so, we are experiencing a growing economy high employment rates, low inflation rates, strong housing market and an equally long list of positive things.

The U.S. ended 2017 with having a string of hurricanes – Harvey, Irma, Jose, and Maria – that caused around $200 Billion dollars in damages only to be followed by a season of fires that destroyed thousands of homes, building, thousands of acres of forests and intensified the stress on an exhausted infrastructure.

Thanks to the thousands of people who have and continue to pitch in with physical help, equipment, materials and supplies hurricane recovery and rebuilding is underway but will take years to accomplish. Groups like Team Rubicon and other veteran organizations along with donations of money and equipment by manufacturers, trade association, dealers, individuals and so many others have made it possible to push ahead with what is an overwhelming task. Healing is always a slow process.

In addition to the tests thrown at us by Mother Nature, we have had a cascade of political and social speed bumps adding hazards as we travel our road into the future slowing the forward momentum and intensifying the risk.

We know what 2017 was like. What can we expect for 2018 and beyond?

Economic forecasting is always tricky and unlike weather forecasting more critically important, especially for the forecaster. We’ve all heard the comment, “Being a weather forecaster is the only job where you can be wrong most of the time and not get fired.” This doesn’t apply to the economists who look at the conditions that are, that were and that will be.

Predictions for 2018 tend to be positive with most economists confident that we will sustain continued and improved national economic growth. I haven’t heard any of them forecasting a recession in the immediate future – the next six months and beyond.

We have included construction industry forecast from leading resources: Wells Fargo Economics Group, American Road & Transportation Builders Association (ARTBA) and Associated Builders & Contractors (ABC). There are many others who do an excellent job of industry forecasting.

On that I wish we could have included but didn’t have room is:

Dodge Data & Analytics (https://www.construction.com/) recently released its 2018 Dodge Construction Outlook, a mainstay in construction industry forecasting and business planning. The report predicts that total U.S. construction starts for 2018 will climb 3% to $765 billion.

“The U.S. construction industry has moved into a mature stage of expansion,” stated Robert Murray, chief economist for Dodge Data & Analytics. “After rising 11% to 13% per year from 2012 through 2015, total construction starts advanced a more subdued 5% in 2016. An important question entering 2017 was whether the construction industry had the potential for further expansion. Several project types, including multifamily housing and hotels, have pulled back from their 2016 levels, but the current year has seen continued growth by single-family housing, office buildings, and warehouses. In addition, the institutional segment of the nonresidential building has been quite strong, led especially by transportation terminal projects in combination with gains for schools and healthcare facilities. As for public works, the specifics of a $1 trillion infrastructure program by the Trump Administration have yet to materialize, so activity continues to hover around basically the plateau for construction starts reached a couple of years ago. Total construction starts in 2017 are estimated to climb 4% to $746 billion.”

“For 2018, there are several positive factors which suggest that the construction expansion has further room to proceed,” Murray continued. “The U.S. economy next year is anticipated to see moderate job growth. Long-term interest rates may see some upward movement but not substantially. While market fundamentals for commercial real estate won’t be quite as strong as this year, funding support for construction will continue to come from state and local bond measures. Two areas of uncertainty related to whether tax reform and a federal infrastructure program get passed, with their potential to lift investment. Overall, the year 2018 is likely to show some construction project types register gains while other project types settle back, with the end result being a 3% increase for total construction starts. By major sector, gains are predicted for residential building, up 4%; and nonresidential building, up 2%; while nonbuilding construction stabilizes after two years of decline.”

Association of Equipment Manufacturers (AEM) has posted a radio link on its CONEXPO-CON/AGG New update. To hear it you can do so at:

http://www.conexpoconagg.com/visit/conexpo-con-agg-radio-podcasts/

ABC Reports: Nonresidential Construction Employment Ends 2017 on a High Note

The nonresidential construction sector added 11,800 net new jobs in December, representing nearly 10 percent of the nation’s jobs created during the month, according to an Associated Builders and Contractors (ABC) analysis of data released today by the Bureau of Labor Statistics. The nation’s overall construction sector added 30,000 net new jobs in December, a 0.4 percent month-over-month increase.

Construction easily embodies the most positive news emerging from today’s national unemployment report. Although both nonresidential building construction (-1,300 net jobs) and heavy and civil engineering (-700 net jobs) were down for the month, job gains were driven by nonresidential specialty trade contractors (+13,800 net jobs). Year-over-year construction employment is up by 210,000 positions, the most since September 2016.

The construction industry unemployment rate, which is available only on a nonseasonally adjusted basis, increased by 0.9 percentage points and now stands at 5.9 percent. The unemployment rate for all nonfarm industries—a figure that is seasonally adjusted—remained unchanged at 4.1 percent for the third consecutive month at a 17-year low.

“Today’s overall job growth number fell short of expectations, but the construction employment numbers surprised to the upside,” said ABC Chief Economist Anirban Basu. “It is likely that some of this is due to ongoing rebuilding efforts after hurricanes and wildfires. We will have a better sense of this once state-level employment figures become available. To the extent that construction job growth, whether residential or commercial, is disproportionately concentrated in states like California, Texas, and Florida beyond pre-disaster norms, one can infer that rebuilding efforts are responsible for at least some of the surge in construction job growth.

“That said, a strengthening U.S. economy is likely responsible for the bulk of construction job growth. Consumer and business confidence have been surging recently,” said Basu. “The recently passed tax cuts will add additional liquidity to the U.S. economy, which should translate into faster consumer and business spending growth. Positive wealth effects from housing and financial markets as well as an improving global economy are also helping to push the economy forward. Higher energy prices and bitterly cold temperatures are also stimulating investment among energy suppliers.

“Despite the recent pickup in the pace of economic growth, interest rates remain remarkably stable,” said Basu. “Among other things, lower interest rates benefit both owners and developers of real estate. This should help translate into growth in activity in a number of private construction segments. As yesterday’s construction spending data indicated, there is also growing momentum in a number of public construction segments, a reflection of improving state and local government finances in much of the nation due in part to stronger residential markets and solid income tax collections. All of this suggests that the average contractor should be eagerly looking forward to 2018. Elevated contractor optimism is consistent with leading indicators like ABC’s Construction Backlog Indicator and Construction Confidence Index. Both of these indicators have been pointing to stronger construction spending and increased staffing levels for months.”

 

 

 

 

 

 

 

 

 

 

 

 

Visit ABC Construction Economics for the Construction Backlog Indicator, Construction Confidence Index and state unemployment reports, plus analysis of spending, employment, GDP and the Producer Price Index

ABC’s Mike Bellaman Appointed to Task Force on Apprenticeship Expansion for all Americans

Michael D. Bellaman, president and CEO of Associated Builders and Contractors (ABC), has been appointed by U.S. Department of Labor Secretary R. Alexander Acosta  to the Task Force on Apprenticeship Expansion, created by President Trump’s June 15 Executive Order 13801.

“I am excited to join Secretary Acosta’s task force to expand opportunities to citizens nationwide who want to live the American Dream while helping to build and rebuild our country,” said Bellaman. “As the president promised in his election night acceptance speech, every single American will have the opportunity to realize his or her fullest potential under his administration. That sentiment will drive this task force as we work to promote affordable education and rewarding jobs for all Americans.”

According to the order, the task force will submit to the president strategies and proposals focused on four areas:

  • Federal initiatives to promote apprenticeships;
  • Administrative and legislative reforms facilitating the formation and success of apprenticeship programs;
  • The most effective strategies for creating industry-recognized apprenticeships; and
  • The most effective strategies for amplifying and encouraging private-sector initiatives to promote apprenticeships.

The task force’s membership represents a wide range of American companies as well as trade, industry and educational groups. The task force comes at a critical time for industries like construction, which employs about 7.5 million people. By ABC’s estimates, the construction industry needs to hire 500,000 skilled workers to fill a backlog of existing jobs. That number could balloon to more than one million job vacancies if Congress and the president approve a $1 trillion infrastructure bill. Reducing barriers to meet the needs of the construction industry and America’s workforce is vital to fill this gap.

“This is an opportune moment for the next generation of American workers and a valuable step for the American economy,” Bellaman said. “Regardless of their access to higher education, all Americans deserve the chance to acquire a variety of skills that can lead to high-paying and fulfilling careers. I am ready to collaborate with my task force colleagues to recommend to the Trump administration the most effective strategies to expand apprenticeship opportunities for all Americans.”

 

Construction Industry Associations AEM & ABC Support Tax Reform Framework

Association of Equipment Manufacturers (AEM) President Dennis Slater issued the following statement in response to the tax reform framework released on Wednesday by members of Congress:
AEM members support a simpler tax code that provides relief to both conventional corporations and “pass-through” businesses, a designation which includes a number of equipment manufacturers and their customers.
The unified tax reform framework released today by leaders in Congress goes great lengths toward meeting AEM members’ goals. Equipment manufacturers currently suffer from a tax code that puts U.S. manufacturers at a disadvantage versus our global competitors. Our industry stands with those in Congress who propose commonsense, permanent tax relief that will renew America’s manufacturing strength.
The current debate over tax reform is a moment of truth for our elected leaders. We will work in the coming months to encourage members of Congress in both parties to deliver on their pledge to advance pro-growth tax reform that supports manufacturing in America.
NOTE: AEM will be releasing the findings from a more detailed tax reform research project in the coming weeks, along with new advertising and grassroots advocacy efforts intended to help advance the industry’s priorities for tax reform.

Tax Reform Framework a Major Step Forward, Says ABC

Michael D. Bellaman, President, and CEO of Associated Builders and Contractors (ABC), issued the following statement supporting the Unified Framework for Fixing Our Broken Tax Code released today by congressional and administration leaders:

“The tax framework released today marks a promising step forward for the first genuine reform of the tax code in a generation. Associated Builders and Contractors is encouraged by the proposal, and we strongly support the tax reform process moving forward.

“The framework and its targets go a long way toward advancing ABC’s tax policy goals. Construction historically faces the highest effective tax burden of any industry. The vast majority of construction firms are small and family-owned businesses that pay taxes at individual rates. The equivalent rate reduction envisioned in the framework for businesses on both sides of the code, paired with a broader tax base, moves toward ABC’s vision of fair treatment for all companies regardless of size, structure or sector.

“While the framework is an important first step, there is much work to be done. Before this process can move forward, Congress must pass a budget resolution that instructs tax writers to turn this framework into legislative language. With so much left to the discretion of the committees, there is little time to spare. We look forward to working with both chambers to build on the structure of this framework in a way that promotes simplicity, fairness and economic growth.”

ABC Reports: Construction Input Price Growth Accelerates in August

Construction input prices rose 0.6 percent in August and are up 3.7 percent on a yearly basis, according to an analysis by Associated Builders and Contractors (ABC) of data released today by the Bureau of Labor Statistics. Nonresidential construction input prices behaved similarly, rising 0.6 percent for the month and 3.5 percent for the year. 

Only three of the 11 key construction input prices fell for the month. The inputs experiencing declines in prices were steel mill products (-1.5 percent), prepared asphalt, tar roofing and siding products (-0.3 percent), and natural gas (-1.8 percent). Crude petroleum prices exhibited the largest increase, rising 11 percent on a monthly basis and 15 percent on an annual basis.

“If we consider what ought to be happening with respect to materials prices, we would expect them to be marching steadily higher,” said ABC Chief Economist Anirban Basu. “After all, the global economic recovery is an increasingly synchronized one. China is on pace to meet growth expectations this year. Europe, Japan, Brazil, Russia and other nations are experiencing meaningfully better recoveries this year compared to 2016. While some economies like Great Britain’s and India’s have stumbled a bit lately, the broader story is one of more rapid global economic growth, driven in large measure by a low interest rate, post-austerity policy environment.

“The world’s improving global economic environment has helped stabilize demand and prices for various commodities. As a result, we are not observing the sharp declines in input prices that occurred during much of 2014 and 2015,” said Basu. “Demand for materials in the United States also remains reasonably high, given ongoing momentum in a number of private segments and indications of stable activity among road builders. The fact that asset prices have been rising, including in key global equity markets, has contributed to pushing materials prices higher, with positive wealth effects triggering greater confidence among real estate developers.

“For now, policymakers around the world appear focused on supporting economic growth.  While this may ultimately translate into problematic global inflation, for now inflation remains under control,” said Basu. “That suggests that accommodative monetary policy will continue to remain in place in much of the world, which will support asset prices, economic growth and demand for construction materials. While surging construction materials prices are unlikely during the near term, with the exception of areas recently impacted by Hurricanes Harvey and Irma, so too are large declines.” 

Visit ABC Construction Economics for the Construction Backlog Indicator, Construction Confidence Index and state unemployment reports, plus analysis of spending, employment, GDP and the Producer Price Index.