By Greg Sitek
Forecasting usually uses a crystal ball for an all-inclusive overview, or a telescope for a long-range view, or a microscope for a finite, specific pinpoint view.
For 2020 a kaleidoscope is probably the correct instrument to use since forecasting anything with respect to the coming year is a virtual impossibility. Typically, there is the “what if” factor that points predictions in one direction or another. For 2020 there are more “what if” factors that stable ones.
Making predictions for the coming year are like shooting the ball in a pinball machine – you just don’t know where it’s going to go, what obstacles it’s going to hit, which direction it’s going to be forced into traveling.
However, for the construction industries, there are a couple of certainties that will remain constant. For Example, March 10 through 14 ConExpo will be held in Las Vegas, Nevada and will be the biggest construction show ever with 2,800 exhibitors, 2,500,000 square feet and 150 education sessions.
For our industries this is where I stop with the predictions. There are numerous bills, proposals, agreements, treaties, etc. waiting to be reviewed, revised, rewritten in and before congress waiting for congressional action all of which will have an impact not only on construction but our entire economy.
According to Dodge Outlook Report we can expect an economic slowdown that will affect total construction growth.
Dodge Data & Analytics released its 2020 Dodge Construction Outlook, a mainstay in construction industry forecasting and business planning. The report predicts that total U.S. construction starts will slip to $776 billion in 2020, a decline of 4% from the 2019 estimated level of activity.
“The recovery in construction starts that began during 2010 in the aftermath of the Great Recession is coming to an end,” stated Richard Branch, Chief Economist for Dodge Data & Analytics. “Easing economic growth driven by mounting trade tensions and lack of skilled labor will lead to a broad based, but orderly pullback in construction starts in 2020. After increasing 3% in 2018 construction starts dipped an estimated 1% in 2019 and will fall 4% in 2020.”
“Next year, however, will not be a repeat of what the construction industry endured during the Great Recession. Economic growth is slowing but is not anticipated to contract next year. Construction starts, therefore, will decline but the level of activity will remain close to recent highs. By major construction sector, the dollar value of starts for residential buildings will be down 6%, while starts for both nonresidential buildings and non-building construction will drop 3%.”
In Contrast, AEM’s 2020 Outlook for Construction predicts “Steady and solid growth is likely to continue for the construction sector. As the second-largest in the world (behind China), the U.S. construction market is poised for 3.3 percent growth this year, 1.7 percent growth in 2020, and somewhere between 1.5 and 2 percent growth for the next five years. Residential construction remains a strong driver – it represents about 40 percent of the total market and, in the last four years, it’s seen double-digit growth. However, as of late, growth has slowed considerably.
“A lot of the optimism we saw in 2017 and 2018 seems to have evaporated,” said AEM Director of Market Intelligence Benjamin Duyck. “There really is no consensus to what the future truly holds.”
Tariffs are playing a role in the uncertainty, as is the need for a new comprehensive infrastructure package.
“Both political parties discuss this quite a bit, but nothing has materialized so far,” said Duyck. “It’s now expected for 2021 – and hopefully it comes soon, as most of the infrastructure spending, we see today occurs at the state and local level.”
“While the outlook for construction remains positive, enough factors are having a negative impact that uncertainty is still pervasive for the time being.”
AEM’s bottom line – “2019 has been a solid year for the economy overall, as well as the ag and construction sectors. A number of factors – global trade wars and protectionism being chief among them – are leading to increased concern that a recession is right around the corner. And while that likely isn’t the case, it’s not unreasonable to suggest one may arrive by 2021.”
Another certainty, there is an election scheduled for November 3, 2020 and there is more on what to expect in the January issues of the ACP magazines. We do have some excellent forecasts for you.