Where are We Now? Economist Looks at Construction Spending Changes Post Pandemic

Anirban Basu, chief economist for Associated Builders and Contractors (ABC), has some good news. Not only is nonresidential construction—a key market for glass and glazing products—up year-over-year in every region of the U.S., contractors have also gone from little to no backlog to 8.5 months of backlog, according to the ABC’s Construction Backlog Indicator. Basu shared this recently during his July 14 presentation, 2021 Mid-Year Construction Economic Update and Forecast webinar. He said while backlog is continuing to rise, construction spending in both the lodging and office sectors, two big markets for glass, are down. Lodging is down 33.7% since February 2020 and office construction spending is down 14.3% since the same time.

“I really believe that the office construction segment will be among the last segments to recover,” Basu said. Part of this is due to building owners looking to save on space and spend less—especially with more and more people now working remotely.

However, while new construction may be down, Basu noted that owners are starting to modernize and improve their existing buildings, something that could translate to more opportunities for the glazing industry.

The retail segment is also seeing less construction. Basu pointed to the closing and bankruptcies of many major retailers in 2020 as reasons for this dip.

Looking at the period from February 2015 to February 2020, Basu pointed to a number of areas where there had been significant spending. Office construction, for example, had been up 81.5% while lodging was up 75.2%.

From February 2020 to May 2021 total construction spending was down 11.1%, which he said was consistent with his expectations.

“What’s not consistent with my expectations, is this rise in backlog and that many of you are saying we’re getting busy again and we can’t find workers again to satisfy our requirements to meet contractual obligations,” he said.

One challenge, he said that small businesses are facing is wondering what they should do right now as far as investing or expanding.

“If you have some concern about the future … you’re not alone,” he said, explaining that a lot of small businesses lack confidence right now, wondering if it’s a good time to expand.

In wrapping up his presentation, Basu said he expects the back half of 2021, which began in June, to be spectacular for economic growth.