Phil Warner, Research Consultant for FMI Corporation, says improvement in residential construction is the primary area of growth in the firm’s latest construction forecast:
Most other sectors, while still improving over 2012, are growing at a somewhat slower rate. One of the reasons for this slow growth continues to be uncertainty caused by the federal budget competition that has gone well beyond the standard for extra innings.
Our overall forecast for U.S. construction put in place has been revised down from 8% last quarter to 7% in the second quarter. The revised figure for total construction put in place is $913 billion for 2013, but we expect growth to return to 8% in 2014 to hit $989 billion. The major markets downwardly adjusted for a slower growth forecast include residential improvements (-1.8%), commercial construction (-0.8%), health care (-3.15%), public safety (-2.5%), amusement and recreation (-2.0%), sewage and waste disposal (-3.8%), and water supply (-3.2%).
While there is no singular reason for the drop in these markets-each is evaluated on its own criteria-there are a few economic concerns that touch all of them. The first is the decline in public construction and expectations of more cuts as the sequestration continues. Second, lenders are still tight with their lending criteria. Consumers are still cautious about increasing their debt load. The economic climate will keep the heat on industry competition, especially if the mostly larger companies that make their livelihood in government construction start looking for work in already competitive private sectors.
Check out FMI’s 2013Q2 report here.
