The Associated Builders & Contractors released its 2011 construction outlook that predicts “grudgingly slow progress” for the construction industry despite the end of the recession for nonresidential construction companies, according to ABC’s Chief Economist Anirban Basu.
“ABC’s forecast of nonresidential construction spending for next year suggests that total spending will be 0.1 percent less than 2010 levels,” said Basu. “Privately financed construction levels are projected to decline 0.2 percent while publicly financed construction levels are projected to be virtually flat.
“The roughly flat expectations for spending are reflected in ABC’s nonresidential construction employment forecast,” said Basu. “After losing about 50,000 jobs in 2010, ABC does not see nonresidential building employment rebounding until 2012. However, ABC predicts that residential construction employment will grow substantially as the number of housing starts will expand by roughly 25 percent.”
The national recession that began in December 2007 ended in June 2009, but because nonresidential construction typically lags the overall performance of the U.S. economy by 12 to 24 months, in 2008, nonresidential construction volumes continued to expand by 9 percent. In 2009, when the recession in the overall economy was over, nonresidential construction spending fell 9 percent, according to U.S. Census Bureau, and ABC projects that spending will fall another 14.7 percent this year.
The good news for 2011 is the period of deep decline in U.S. nonresidential construction spending is over; however this means the industry will remain stagnant, with overall construction volumes mired at or near bottom-of-the-cycle levels. That means 2011 construction spending is positioned to be nearly a quarter less than 2008 totals.
As a whole, 2010 was a period of widely variable performance between construction segments as sectors powered by the availability of federal stimulus funds experienced growth, and privately financed activities buckled under the weight of depleted capital availability and excess supply. Next year, ABC predicts the variable in performance between segments will be much less, at least in terms of percentage changes in spending volumes.
ABC expects power will lead the way for segments that are poised to experience spending growth in 2011, with an anticipated increase of 5.5 percent. In contrast, segments closely linked to state and local government spending are positioned for a decline as many states and localities trim both operating and capital budgets and construction volumes in the education category suffer.
Privately financed construction will likely fare better in 2012, because credit conditions will improve by that point as large, well-capitalized banks become more aggressive in their pursuit of industry market share. Finally, certain leading indicators have turned the proverbial corner, including ABC’s Construction Backlog Indicator, which has been indicating a steady improvement in the commercial and industrial construction outlook.
To read the full outlook, visit www.abc.org.