Dodge Data & Analytics released its 2019 Dodge Construction Outlook, a mainstay of construction industry forecasting and business planning.
The overall sentiment of the new report is that the peak of construction has already occurred, and next year is likely to be flat. In specific, Dodge estimates total U.S. construction starts in 2019 will be $808 billion, which is essentially equal to the $807 billion predicted through the end of 2018.
"Over the past three years, the expansion for the U.S. construction industry has shown deceleration in its rate of growth, a pattern that typically takes place as an expansion matures," said Robert A. Murray, chief economist for Dodge Data & Analytics. "After advancing 11 percent to 14 percent each year from 2012 to 2015, total construction starts climbed 7 percent in both 2016 and 2017 and a 3 percent increase is estimated for 2018."
One reason for the prediction of a flat 2019 is that the stimulus provided by the tax cuts has already run its course, and, unless there are more cuts or something else stimulates the economy, further significant growth in the near future is unlikely. Furthermore, even if the federal government does something to stimulate the economy, the boost would be temporary, according to Murray.
Other reasons for a predicted flat 2019 are rising interest rates and material costs. For now, though, these have been balanced by the strong growth of the U.S. economy, some easing in bank lending standards, and healthy market fundamentals for commercial real estate, as well as more state financing for school construction and enhanced federal funding for public works.
In specific for 2019, Dodge predicts single-family housing will be unchanged in dollar terms with a 3 percent drop in housing starts; multifamily housing will slide 6 percent in dollar terms and 8 percent in unit starts; commercial buildings will see a 3 percent dollar drop; institutional buildings will advance 3 percent in dollar terms; manufacturing plant construction will rise 2 percent in dollar terms; public works construction will increase 4 percent in dollar terms; and electric utilities and gas plants will see a 3-percent drop in dollar terms.
Beyond 2019, Dodge is predicting a slight downturn, or even a mild recession in 2020, but nothing as severe as 2008–2009. However, Dodge believes an escalating trade war between the United States and China could advance the impending recession and make it more severe.
For a more detailed and in-depth dive into the 2019 construction outlook, including breakdowns of markets and regions relevant to your business, look for Jeff Gavin's feature article in the January 2019 issue of Electrical Contractor magazine.