Construction Industry Rebound May Be Impacted by Current Economic Trends

by | Sep 10, 2018 | Industry News

Construction industry spending has continued to grow since the start of the Great Recession, and the most recent figures reveal that there are some positive and negative outlooks for this industry. The latest report from the U.S. Department of Commerce shows that construction industry spending hit its highest level in over two years and experienced its biggest increase since 2012.

Other broad economic factors such as low unemployment and high consumer confidence are positive construction industry economic trends. On the other hand, there are still severe labor constraints in the construction sector and supply issues that could impact materials costs in the coming year.

U.S. Construction Industry Rebounds

In April of this year, U.S. construction spending was up 1.8%. This was an increase of 7.6% over the prior year and equates to a seasonally-adjusted spending rate of $1.31 trillion. Such an increase was the largest jump since January 2012.

There have also been some steady additions to construction industry jobs in 2018. Data from the Bureau of Labor Statistics reveals that 25,000 new construction jobs were added in April. Also, the average weekly wage there was $1,170.39, which was higher than the national average of $925.98.

The Association of Builders and Contractors (ABC) reports that roughly 286,000 jobs were added to this sector year-over-year. This represents the largest increased in jobs added since April 2016.

Construction Industry Economic Trends and Areas of Concern

There is positive news on several fronts, including some bullish predictions for this industry over the next several years. Even so, there are also several areas of concern that could stifle growth in this industry by impacting labor, materials prices, and delivery times.

Consulting firm FMI predicts that U.S. engineering and construction will end the year up 6%, compared to just 4% growth in 2017. Some of the largest areas of growth include transportation, office, and residential improvements.

The Construction Lender Risk Management Roundtable forum also reviewed several positive trends and areas of potential concern within this market. On a positive note, there will continue to be a high volume of deals with favorable lending terms available. In fact, most lenders have plans for additional investments in technology, which is a sign that they have confidence in market growth.

Unfortunately, there are also several areas of concern in the construction sector. Growing trade disputes, transportation constraints, and even out of control wildfires are creating a perfect storm for materials shortages, driving prices to all-time highs. Recent foreign steel (25%) and aluminum (10%) tariffs are heightening fears about soaring materials costs.

Even though the labor figures are encouraging, there remains a severe shortage in this industry. This is has been a persistent issue since the start of the Great Recession, where there is a continued lack of skilled workers to fulfill the demands of major construction projects. This not only inflates costs but also creates time delays and can result in business disruption for commercial clients.

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