The U.S. commercial and industrial construction industries will continue to see steady growth next year, according to the Associated Builders and Contractors (ABC) forecast. ABC predicts a 7.6-percent increase in nonresidential construction spending in 2016, along with growth in employment and backlog.
ABC chief economist Anirban Basu says ABC’s leading indices each suggest 2016 “will be another solid year for the typical U.S. nonresidential construction firm.” ABC’s Construction Confidence Index encompasses expectations with respect to hiring, profit margins and projected sales growth.
“According to the most recent survey, overall contractor confidence has increased with respect to both sales (67.3 to 69.4) and profit margins (61 to 62.9),” he says. “And while the pace of hiring is not expected to increase rapidly during the next six months, largely because of the lack of suitably trained skilled personnel, the rate of new hires will continue at a steady pace.”
ABC’s Construction Backlog Indicator also projects strong demand in the coming months. According to the latest backlog survey, average contractor backlog stood at 8.5 months by mid-year 2015, with backlog surging in the western United States and the heavy industrial category.
“A weak global economy and stronger U.S. dollar will prevent the U.S. economy from surging ahead in 2016,” says Basu. “Stakeholders can expect a 2.2 percent rate of growth (or similar to that) next year. There are significant risks to the downside, including volatile financial asset prices. The recent softening of job growth may keep the Federal Reserve pinned on the sidelines for the balance of 2015. Under most conceivable scenarios, rate increases will be gradual and intermittent. However, construction stakeholders can find reasons for encouragement. The U.S. unemployment rate has fallen, and the nation is roughly a year away from full employment. Wage growth is set to accelerate, which should keep the consumer spending-led recovery in place.”
Basu’s full forecast can be viewed here.