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2019 Mid-Year Construction Economic Outlook

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Anirban Basu, chief economist of Associated Builders and Contractors, recently published his 2019 mid-year economic outlook , a valuable industry snapshot for stakeholders in the construction industry. In his outlooks, Basu discusses current industry performance and provides a forecast for economic circumstances in the years to come. Among his considerations for this forecast are industry trends, domestic and global political and economic developments, corporate spending activity, and investor confidence.

Basu notes that while economists have pointed to trade disputes, slowing growth, foreign conflict, and diminished investor confidence as reasons we will see a recession, the economy has expanded in spite of such indications thus far. However, these trends may have begun to take hold on the economy, highlighted by Basu’s chief concern, declines in corporate spending and investment:

Most revealing was a 10.6% decline in private investment in nonresidential structures on an annualized basis.”

Basu stops short of indicating this will lead to a recession, as consumer spending and governmental investment have seen increases in 2019. However, the decline in private investment may raise the eyebrows of some contractors as a sign that the vulnerabilities noted above are impacting businesses. He presents a situation in which the trade disputes, foreign conflicts, etc. weigh on corporate earnings, preying on the lower confidence of investors who may be more inclined to sell shares, resulting in decreases in stock prices. To combat this, companies may reduce spending, including on labor. Increased unemployment could harm the strong consumer spending the economy has experienced, and further fuel this vicious cycle.

Contractors should feel confident that large backlogs could carry them into 2020-2021 despite such a scenario, but these factors could potentially impact their businesses beyond those years as demand for construction declines. As Basu notes, the economy has survived the increased threats of a recession thus far, and could continue to do so in coming years. The resolutions of trade conflicts and results of the 2020 elections will certainly have a substantial impact on the economy and its performance over the next few years, but for now, contractors can enjoy what they’ve experienced for the past decade, an expanding economy.