McGraw-Hill 2013 Construction Forecast Recap

McGraw-Hill 2013 Construction Forecast Recap

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A Recap of the  The 2013 McGraw-Hill 2013 Construction Forecast

According to numbers from McGraw-Hill, the outlook for commercial construction in 2013 is good, though growth may be slow. Numbers from the last couple of years show that growth in the construction industry has been hesitant, at best. Compared to the 2005 peak of construction activity, the industry has a long way to go. The data shows, however, that the industry is starting to make the journey toward recovery and that some areas of construction have shown promising growth.

Slow Sectors

Cuts in government spending at the city, state and federal levels have resulted in a slowdown in institutional construction. During 2011, there was a 14 percent decline in the amount of construction starts for public works buildings, which improved slightly, to a three percent decline in 2012. According to McGraw-Hill, this sector of the construction industry can expect to see a one percent decline in starts over the course of 2013, continuing the trend of slow, but steady, improvement.

US Construction PatternsInstitutional buildings in general showed some of the slowest growth patterns. The 11 percent decline in construction starts in 2011 was followed by a 13 percent decline in construction starts in 2012. In the coming year, this sector of the industry is predicted to remain flat.

Manufacturing buildings exhibited a 31 percent decline in new starts in 2012, but that is expected to improve in 2013. Next year, statistics show an anticipated eight percent growth in the rate of manufacturing building construction starts.

Some of this data is affected by factors that are quite outside the control of the construction industry. For example, the upcoming presidential election adds a bit of uncertainty to the financial sector, which tends to make businesses hesitate about making new investments. At the same time, the so-called “fiscal cliff”—an agreement reached by Congress that, if certain reductions in spending could not be met by 2013, massive cuts would be required—is adding uncertainty to construction in the institutional and public works sectors.

The Good News

As is the case with any economy, the news is not entirely bad. In fact, significant growth is forecasted for some sectors.

Multifamily housing has shown growth since 2010. In 2011, there was a 32 percent increase in new multifamily housing starts. In 2012, that number was 21 percent. In 2013, industry experts expect that the growth in the multifamily housing sector will increase by 16 percent.

Single-family housing, which experienced a -3 percent growth rate in 2011, picked up 27 percent in 2012. In 2013, single-family housing is predicted to see a growth rate of 24 percent for new starts.

Commercial buildings, including hotels and warehouses, are expected to see increases in new starts, as well. In 2011, there was a 14 percent increase in new starts for commercial buildings. That trend continued to a five percent increase in 2012, and is expected to be somewhere around 12 percent in 2013

The increase in manufacturing buildings should also be good news for commercial construction firms. This follows a decline in construction, and the improvement may lend some new energy to the economy.

If Recession Doesn’t Hit

One of the fears that economists have is a double dip recession. Provided that the economy avoids this in 2013, the building sector in general should see some improvements. For example, hotels have been experiencing lower vacancy rates and more money coming in from their rooms. This may make it worth their while to add new construction to their establishments, hence the predicted growth in the commercial construction sector. If the economy should slide into a recession, however, those gains could be negated.

Sluggish Growth

Economic growth has been slow, but steady, for the most part. According to statistics from McGraw-Hill, acceleration in the growth of the GDP has been followed by slower activity over and over again. As an example of this, the last three months of 2011 showed 4.1 percent growth, followed by two percent growth in the first quarter of 2012, and then 1.3 percent growth in the second quarter. At the same time, job growth averaged 226,000 jobs per month for the first three months of 2012. The second quarter saw the jobs number fall to 67,000 jobs per month but, again, that figure rose to 146,000 jobs per month in the third quarter. Unemployment has been falling, but remains relatively high.

Conclusion

Certain sectors of the construction industry will likely grow during 2013. This growth, however, if it follows current trends, will likely be hesitant and may take some time to take hold before the construction economy fully recovers.

 

 

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