Q1 2019 Economic Indicators

mmcrebuildstg on May 28, 2019

The U.S. economy grew 2.9% in 2018. While the economy is growing, GDP’s declining trend (Q1 = 4.1%, Q3 = 3.5%, Q2 = 2.2%, Q4 = 2.2%) signals growth is slowing. “In 2018, momentum accelerated. In 2019, we will see momentum decelerating. The inflection point was really the fourth quarter last year,” said Gregory Daco, U.S. economist at Oxford Economics. “This does not mean we’re headed for a recession. It just means growth will slow to about 2% this year and next.” (Long, 2019)

Despite the anticipated slow down, ABC’s Chief Economist Anirban Basu believes the demand for nonresidential construction services will remain elevated for the foreseeable future. “A major source of influence is the reemergence of public construction spending,” said Basu. “With nearly 10 years of economic expansion complete, many state and local governments are experiencing their best fiscal health in years, resulting in more funds to invest in roads, transit systems, schools, fire stations, and police stations. The combination of spending growth in certain private construction categories and rising infrastructure outlays will keep the average American nonresidential contractor scrambling to retain and recruit workers, especially in the context of a national rate of unemployment effectively at a 50-year low.” (Basu, 2019)

Results from the ABC’s Construction Confidence Survey showed that 70% contractor expect to increase staffing levels, and 56% anticipated rising profit margins.

In March, the AIA’s ABI dropped to 47.8 for the first time in two years. The AIA does point out the fact it was a hard winter and even though the ABI dropped below 50, backlog is at 6.5 months. Again, this does not indicate a recession, especially since “consumer finances remain generally strong, that financial market conditions are not currently too restrictive, and that the commercial construction sector is not yet overbuilt.” (Bryson & House, 2019)

Do you anticipate increasing staff levels? How has your 2018 influenced your 2019? We continue to focus on steady, strategic growth, delivering technical excellence, and satisfying our partners and clients. Whatever the economy brings us this year, we’ll be ready to continue to perform at our best and help our clients manage their projects in the most cost-effective, efficient ways possible.

References
Basu, A. (2019, May 23). Construction contractors confidence remains high in March. Retrieved from www.abc.org: https://www.abc.org/News-Media/News-Releases/entryid/16313/construction-contractors confidence-       remains-high-in-march
Bryson, J., & House, S. (2019). U.S. Recession? How Do We Count the Ways? Wells Fargo. Retrieved from https://www08.wellsfargomedia.com/assets/pdf/commercial/insights/economics/special-reports/recession-20190401.pdf
Long, H. (2019, March 28). GDP revised downward for 2018 as U.S. economy shows more signs of slowing. Retrieved from www.washingtonpost.com

Q4 2018 Economic Indicators

mmcrebuildstg on February 6, 2019

We know a recession is coming, but we do not know when. In the 2019 FMI Overview, FMI reminds us that now is the time to prepare for the next downturn while the market is still good. To prepare, FMI put together a list of the top lessons learned from the last recession.

  1. Do not wait too long to make any hard decision you have been deferring.
  2. Find your sweet spot and do not just follow the herd.
  3. Work on the new, envisioned future and set the strategy for post-recession success.
  4. Get a grasp on “incremental economics” like revenue, margin, and overhead.
  5. Maintain a healthy balance sheet in the context of growth plans.
  6. Get positioned in your market early.
  7. Get more feet on the street.

We are looking ahead and cautious, and we will be ready when the recession hits. Will you be ready?

Q3 2018 Economic Indicators

mmcrebuildstg on November 6, 2018

Executive Summary

The labor shortage over the past years has caused wages to escalate. According to a report by Zillo Research, at the start of 2017, wages for construction-industry workers were growing slightly slower than wages for other workers – around 2.5% per year. But they are now growing 3.8% per year. This is happening for both skilled laborers and salaried positions. Anirban Basu, ABC’s Chief Economist, states in a Nov. 1 construction employment news release, “one potential cause for concern is growing evidence that wages have begun to rise much more rapidly of late. That, along with other sources of inflation, can be expected to push interest rates higher, which in turn would ultimately translate into more expensive financing for construction projects and fewer construction starts. But for now, it is all systems go for the U.S. nonresidential construction industry.” We’ll be keeping a close eye on how this might impact the industry.

2018 Q2 Economic Indicators

mmcrebuildstg on August 2, 2018

12 Month Performance Summary

The construction industry has seen a 4.4% increase in net new jobs (308,000) since the first of the year. Industry unemployment decreased to 3.4% in July, which is the lowest in recorded history. Construction starts are up 2% Jan.-July 2018 from the same period last year. While these numbers look good, there is still a lack of skilled workers, and the pinch is being felt on construction schedules. Even after careful planning and paying attention to the labor market and concurrent local projects, schedules are being delayed. The consequences of which are felt throughout the project’s duration. Organizations are working to make a difference. Workforce development is a high priority of the Associated Builders and Contractors, Inc. (ABC) and they are pushing to expand apprenticeship opportunities in congressional testimony. Miles-McClellan is an active member of the ABC both in Central Ohio and Charlotte. Trade partners that invest in their people and workforce development programs, generally are also members of ABC. We participate because we want to have relationships with those companies. The apprenticeships that are happening now aren’t necessarily putting more people on jobs right now, but it speaks to the commitment from within the industry to improve the labor market.

2017 4th Quarter Economic Indicators

mmcrebuildstg on February 8, 2018

According to the latest Associated Builders and Contractors (ABC) Construction Confidence Index (CCI), the majority of commercial and industrial contractors are confident about sales growth, profits, and staffing levels heading into 2018.

“Despite the completion of approximately eight and a half years of economic recovery, both inflation and interest rates remain low,” said Basu. “The combination of elevated wealth and confidence with low borrowing costs drives spending and investment, which supports higher demand for construction services.”

We like that positive news!

Adapted from: Basu, A. (2017, December 7). Buoyed by Healthy Economy, ABC Index Finds Contractors Upbeat. Retrieved from abc.org

2017 3rd Quarter Economic Indicators

mmcrebuildstg on November 10, 2017

The Associated Builders & Contractors reported a slight decline in nonresidential construction employment. Determining why this happened is proving difficult because of the following possible reasons: stalled construction projects, impact from the recent storms, or lack of skilled laborers to take over for the skilled laborers that retired. In our case, the lack of qualified labor to replace/fill positions hurts us the most. We’re curious, have the other two reasons affected your productivity?