FMI's Construction Outlook 2nd Quarter 2014

Randy Giggard

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Quick Overview

Overall, our construction forecast remains in the cautiously optimistic zone; it is just that we are a little more cautious and a little less optimistic.

Details

We are still optimistic in our forecast, but we have dropped the overall growth rate by one percent. In part, this is due to reduced government spending, while private spending isn't growing fast enough to take up the slack. Large markets like education and health care are showing little to no growth at this time. States are reluctant to turn up the spending even though tax revenues are improving, and health care is waiting on changes in policies in health care insurance to settle out.

Overall, our construction forecast remains in the cautiously optimistic zone; it is just that we are a little more cautious and a little less optimistic. We still believe that residential construction is expected to remain a high-growth market, but we have once again pulled back on the outlook. Multifamily is still a fast-growing market, but the rate of growth is slowing. Home improvements are improving. The interplay among these three residential categories is dynamic and heavily influenced by job growth, wage growth and interest rates, among other factors.

Despite all our well-reasoned and researched caution, we still feel that in some areas nonresidential construction is on the verge of breaking out of its long slumber. For instance, health care and education markets have both slowed due to political circumstances. Those issues could be solved next year, and the pent-up demand will come rushing into the markets. Infrastructure is another example. If someone can come up with the political will or new ideas for funding and operating, this area could take off. These are long shots at this time, but we may even see a Triple Crown winner this year too. All that said, we expect total construction put in place to grow at the rate of seven percent this year and for the next few years. Despite all odds and nasty economic weather, the nation needs to grow, and that means more construction projects.

FMI's Construction Outlook 2nd Quarter 2014

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