Construction Economists Continue to Project Growth into 2014

Overall construction will continue to experience growth—perhaps even accelerated growth—through 2014, according to economists during Reed Construction Data's mid-year forecast, "Riding the Roller Coaster: Ups and downs in construction, spending, materials and labor." The forecast webinar took place May 9 and the archived presentation is available for online viewing.

"Commercial construction turned around in 2012, and is expected to continue to improve," said Bernard Markstein, U.S. chief economist, Reed Construction Data. Markstein added that while "nonresidential building construction has struggled lately, it is expected to perform better in the second half of this year and in 2014."

According to Kermit Baker, chief economist for the American Institute of Architects, "market fundamentals for major construction sectors are generally positive and point to further growth." For the nonresidential segment, architectural billings, a leading indicator of construction activity, "are seeing strongest growth since the downturn began."

Baker says expectations for growth in the segment are good, "not great," for 2013 and 2014. Total nonresidential construction is forecast to increase 5 percent in 2013, and 7.2 percent in 2014. By segment, commercial construction will lead the recovery, and is expected to increase 8.6 percent in 2013, and 10.7 percent in 2014. Institutional is forecast to see slight gains—1.2 percent in 2013 and 4.7 percent in 2014.

Ken Simonson, chief economist for AGC of America, said the construction industry should be aware of three general trends that will continue to hold down construction growth:

Reduction in government spending for schools and infrastructureA consumer switch from buying in stores to online purchasingA reduction from employers in office space per employee

Additionally, the industry should prepare for increasing costs, Simonson said. He projects material costs will increase 3 percent to 8 percent from 2014 to 2017, and labor costs will increase 2 percent to 5 percent. Bid prices are expected to rise between 2 percent and 5 percent, he said.

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