Annual put-in-place construction predictions shrink to $913 billion
In its new "Q2-2013 Construction Outlook," FMI, Raleigh, N.C., reported that the strength of individual markets is shifting, reducing annual construction-put-in-place predictions to $913 billion — a 7% growth from 2012. This is down nearly $6 billion from the $918,897 million, 8% growth level estimated in the Q1’s Outlook. However, FMI does expect growth to return to a 8% growth level in 2014 with annual CPIP reaching $989 billion.
The major construction markets adjusted downward with lower expected growth are:
• Residential (-1.8%) — FMI continues to forecast a 23% increase in construction put in place for single-family housing. However, multifamily housing has dropped from a strong increase of 42% in 2012 to a current 31% increase for 2013.
• Commercial (-0.8%) — The current forecast calls for about a 1% drop in commercial construction from the Q1 forecast. However, this still represents a modest increase of 6%, to $49.8 billion for 2013. One of the contributing factors is that sales for retail and food service businesses is slower than initially anticipated.
• Healthcare (-3.15%) — Contributing factors for the decrease include hospital beds per 1,000 people trending downward and shorter patient stays.
• Amusement and recreation (-2.0%) — Given the belt-tightening attitude across the country right now, it will likely be much more difficult to get funding from taxes and municipalities to build new stadiums in the near future.
• Sewage and water disposal (-3.8%) — Construction for sewage and waste disposal was off 2% in 2012. FMI forecasts another 2% drop in 2013. The ability to fund necessary water infrastructure improvements is central to the decline as many municipal water systems still depend on the tax base for funding.
• Water supply (-3.2%) — Construction for water supply projects will drop 1% in 2013 after dropping 7% in 2012. On the bright side, in March the Senate Environmental and Public Works Committee unanimously approved a Water Resources Development Act, including a measure to create the Water Infrastructure Finance and Innovation Act. WIFIA would provide $50 million per year from 2014 to 2018 to help fund large-scale water infrastructure projects.
While there is no singular reason for the drop in these markets, FMI suggests there are a few economic concerns that touch all of them, including: the decline in public construction; expectations of more cuts as the sequestration continues; tight lending criteria; and consumers being cautious about increasing their debt load. For more information, download a full copy of the report.