ELECTRICAL CONTRACTOR’s 2016 Construction Outlook
is based on two forecasts. One is compiled by Dodge Data
and Analytics and the other by Construction Market Data
(CMD). Other forecasts, including the National Association of Home Builders (NAHB), show similar growth
for 2016, while offering slightly different sector performance numbers. Overall, forecasts agree that total
construction activity is trending upward on a cycle that
began in 2011 (see Figure 1).
The U.S. economy and construction
Beth Ann Bovino, chief U.S. Economist for Standard & Poor’s Rating Services, spoke at the 2016 Dodge Construction Executive
Conference in Washington, D.C., on Oct. 30, 2015. She said the U.S.
economy seems to be nearing normal, and she cited several reasons,
including an unemployment rate close to a “normal” range of 5. 2 to
5. 8 percent (see Figure 2). The Bureau of Labor Statistics reported
employers added 2. 8 million jobs from September 2014 to September 2015, with 1. 8 million created in the first nine months of 2015.
Other encouraging statistics include increased consumer
spending and more revolving credit (see Figure 3), a strengthening
housing market, a return of U.S. manufacturing, resolution to last
autumn’s U.S. government budget impasse, and the Federal Reserve
(Fed) ready to begin raising interest rates.
“These are all reasons for optimism,” Bovino said. “We are
seeing improvement in nonfarm employment, construction
employment (see Figure 4). The ‘missing piston’ in this recov-
ery—housing—is back. Housing starts are bettering 1 million over
the past five or more months [largely second half of 2015]. There’s
also an improvement in home prices. First-time homebuyers [half
of which are millennials] are now buying big-ticket items. For
example, millennials make up the largest share of new car buy-
ers [a thriving market]. We are now seeing the beginning of home
purchases for this group. Multifamily is close to prerecession levels.
Overall, confidence is returning in this economy.”
Worker confidence and bargaining power also is growing. In
fact, it may be stronger than suspected.
“Construction starts and construction spending show the expan-
sion is continuing,” said Robert Murray, vice president, economic
affairs, Dodge Data
and Analytics. “Starts
are a leading indicator of construc-
tion health and impact of materials
costs. They did pull back in the third
quarter [of 2015], causing some to ask if
construction stalled. I don’t think so. Put-
in-place figures [lagging behind starts] are
up 19 percent.”
Murray predicted the patterns of
growth shown in 2015 would continue into
As a leading indicator of nonresidential building
construction, the Dodge Momentum Index tracks initial
reports for nonresidential projects at the planning stage, and
it provides insight into future construction spending. From a low
point in 2011–2012, the index has climbed almost half of the way
back to its 2008 high (see Figure 6).
Lending has also reacted to a growing economy
“In a Fed survey, lending standards have eased [ 18 months for
commercial and real estate loans],” Murray said. “Some easing in
residential loans has been seen, as well.”
In the second quarter of 2015, commercial and multifamily
mortgages rose 29 percent over the same period in 2014. In the
third quarter, it grew 12 percent. The Mortgage Bankers Asso-
ciation also reported the delinquency rate for mortgage loans
(one- to-four-unit residential properties) decreased to 4.99 percent
at the end of 2015’s third quarter. This marked the lowest level since
the first quarter of 2007.
In other positives, Murray said oil prices should continue at
$44–$50 per barrel, which will sustain the break for consumers
at the gas pump. Improved state fiscal health is another positive,
although it is still fragile for some states. A large number of bond
measures were and are being passed. Material pricing is also “pretty
positive,” but with nonresidential construction hovering near 1 percent, labor shortages are dampening construction growth.
A shared view
Presented at Greenbuild 2015 on Nov. 19, 2015, in Washington, D.C.,
CMD’s “Construction 2016: How Sustainable is the Construction
Economic Recovery?” offered findings in line with Dodge’s research.
Alex Carrick, chief economist for CMD, said the country’s
independence from foreign energy puts the United States in a
“The 206,000 on-average job gains month-to-month is the best
it’s been since the ’70s,” he said.