Sunday, October 7, 2018

2019 Construction Industry Outlook

Last month I went to a construction industry trade conference and attended a session presented by ITR Economics.  I enjoy listening to economic forecasts and do so a few times a year.  ITR is one of my favorite firms in this space as they not only look at the near term, they review longer macro trends and forecast several years out.

I’ve included a copy of their full presentation at the end of this post, however I’ll put the summary below for those that don’t have time to review it in full. 

ITR Summary as of Fall 2018

  •          Nonresidential construction lags; expect a strong year in 2019

  •         Expect fewer projects up for bid late next year to fill 2020 pipeline

  •          Multi-Family/Apartment market still throwing off warning signs, be cautious

  •        Wage and input cost pressure will be intense near-term; prioritize profitable work in 2019, accept leaner             margins looking into 2020

  •         Build cash reserves next year to ensure you can survive a later slowdown

  •         Do anything to avoid layoffs, labor market will be tight through 2020

  •         Follow the Leading Indicators

Although not as good as having an economist present the data to you, I will say clicking through the presentation embedded below is interesting nonetheless.  It provides data on the economy at the national level while also providing state by state economic/demographic data using easy to view maps.  The presentation also covered data on the various sectors of the construction industry including US office buildings, private commercial buildings, educational buildings, hospitals, etc.

One area highlighted was how government spending on healthcare, social security and interest continues to increase as a % of Gross Domestic Product.  In 2018 these areas accounted for just under 21% of total GDP.  That number is forecast to rise to 25% of GDP in the 2030s which will pose problems.  Right after this section there is a slide entitled “What to Tell the Kids” and it stated the following:

  •         Live below their means

  •         Learn a second language

  •         Each household should have multiple or diverse income streams

  •         Choose career(s) oriented toward the “opportunities”

  •         Pay off as much debt as possible by 2030

  •          Be ready to buy at the price cycle low in the depression 

  •          Be self-reliant

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