ABC Predicts Construction Industry’s Stability for 2018

WASHINGTON – Associated Builders and Contractors chief economist, Anirban Basu, predicts stability for the construction industry’s economy and expanding nonresidential construction spending in 2018.

While construction project backlog and contractor confidence remain high heading into the new year, Basu warns there are risks to the 2018 outlook as a number of potential cost increases could come into play.

“With wage pressures building, health-care costs surging and fuel prices edging higher, inflation is becoming more apparent,” Basu said. “That could translate into some meaningful interest rate increases in 2018, which all things being equal is not good for construction spending.”

Basu added that asset prices might head in a different direction in 2018, including commercial real estate prices. Projects, such as hotels, office buildings and apartments have helped to fuel construction spending in recent years. If the value of properties begins to stagnate or worsen, construction spending momentum will eventually wind down. The impact of this may not be felt in 2018, however, but in years following, Basu said.

“A recent reading of the Conference Board’s Index of Leading Economic Indicators suggests that the U.S. economy will enter 2018 with substantial momentum,” said Basu. “Corporate earnings remain healthy. Global growth is accelerating. Consumers are upbeat. Tax cuts could fuel faster business spending. All of this suggests that the construction recovery that began in earnest in 2011 may have a few more birthdays ahead.”

Read Basu’s full 2018 construction economic forecast in Construction Executive magazine.

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