1 / 27

Construction Industry and Economic Outlook 2007-2008

Construction Industry and Economic Outlook 2007-2008. Jeffry H. Taylor Chief Economist ABC National ABCC and CFMA Triangle Luncheon July 11, 2007. Macroeconomic trends and forecast. GDP GROWTH : gradual increase, but no return to trend (3%) until second half of 2008

Gideon
Download Presentation

Construction Industry and Economic Outlook 2007-2008

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Construction Industry and Economic Outlook 2007-2008 Jeffry H. Taylor Chief Economist ABC National ABCC and CFMA Triangle Luncheon July 11, 2007

  2. Macroeconomic trends and forecast • GDP GROWTH: gradual increase, but no return to trend (3%) until second half of 2008 • Consumer spending, and to a lesser extent business investment, key to the economic recovery • Housing market will not add to GDP until 2008 • Global economy is slowing, but remains healthy

  3. Macroeconomic trends and forecast • INFLATION: Inflation is on the rise, but core inflation has likely peaked • Food, energy, medical care, and rents driving inflation higher this year • Moderate growth should allow for decline in the CPI in 2008 • Energy costs and a tight labor market will continue to pressure prices

  4. Macroeconomic trends and forecast • INTEREST RATES: The inversion of the yield curve is unraveling slowly • A flat yield curve will give way to a normalized yield curve in 2008 • FOMC not likely to alter the Fed Funds rate; however an increase is possible • 2007: 3-mt-5.2%; 2-yt-5.1%; 10-yt-5.3% • 2008: 3-mt-4.7%; 2-yt-5.0%; 10-yt-5.1%

  5. North Carolina Economy

  6. North Carolina Economy

  7. North Carolina Economy

  8. North Carolina Economy

  9. South Carolina Economy

  10. South Carolina Economy

  11. South Carolina Economy

  12. South Carolina Economy

  13. Today’s Construction Industry

  14. Today’s Construction Industry

  15. Recent Construction Trends • May construction spending: $1.18 trillion up from $1.17 trillion in April, but down 2.8 percent from May 2006 • Non-residential construction spending in May increased to $620.6 billion from $605.7 billion in April and is up 15.4 percent from May 2006 • Residential construction spending has declined 17.3 percent over the past year to $556 billion

  16. Recent Construction Trends 2 • All segments of non-residential construction spending rose in May and only two segments declined over the past 12 months (religious and conservation) • Commercial, office, educational, and highway/street spending very strong • Health care, lodging and power spending remains robust

  17. Construction Spending Forecast2007 • Total spending in 2007 is expected to decline by 1 percent to $1.18 trillion • Non-residential buildings and non-residential structures spending are forecast to increase by 9 percent and 7 percent respectively this year • Residential construction spending is projected to decline by 10 percent in 2007

  18. Construction Spending Forecast2008 • Total spending in 2008 is expected to rise by 6 percent to $1.26 trillion • Non-residential buildings and non-residential structures spending are forecast to increase by 8 percent and 7 percent respectively in 2008 • Residential construction spending is projected to increase by 5 percent next year

  19. Labor Issues • Shortage of craft workers and project management: demographics and the evolution of the economy • Need to improve the image of the construction industry: education and outreach • Retention of employees: pay, benefits, training, workweek flexibility • Embrace diversity: both workers and supervisors

  20. Materials Costs • Global supply and demand trends are not favorable over the near-term: expect significant volatility • Construction segment PPI trends (May): overall 0.9%/4.1% y/y; construction inputs 0.8%/3.3% y/y; highway and street 1.9%/5.5% y/y; other heavy construction 1.5%/4.9% y/y; multi-family residential 0.4%/3.2% y/y; commercial building 0.8%/3.2% y/y ; new schools 0%/13.3%; new warehouses; 0%/6%; new office 0%/7.3%

  21. Materials Costs2 • Crude goods (16% YTD) and energy inputs placing significant upward pressure: not expected to abate over the near-term • Fuel prices off highs but: crude oil up 16% YTD; and #2 diesel up 25% YTD • Recent commodity PPI increases over the past year (May): asphalt 12%; iron and steel scrap 29.5%; copper scrap 32%; steel mill products 17%; concrete products 4.6%; construction sand/gravel 9.1%

  22. Immigration Reform • Immigrants are a growing and substantial segment of the labor force: currently 23 million and accounted for 50 percent of the labor force growth over the past decade • Immigration, legal and illegal, have allowed for the growth in construction employment • Need to deal with the illegal immigrants presently in the workforce (12 million) • Visa approvals should be more job-related and less family-related • Critical for economic growth: tax revenues, future homeowners, skilled labor base (H1 Visa program expansion)

  23. Productivity • Due to increased competition, productivity increases are critical • Worry about what is under your influence and think like a business person, not just as a contractor • Recruit and maintain skilled supervisors and workers, apply technology, innovate, and work hard • Develop metrics (measures) to determine productivity

  24. Construction Union Membership Trends • Since 2000, the number of construction industry union members remained at approximately 1 million • However, union membership as a percent of the total construction workforce declined significantly over the period • 2000: 18.3 percent • 2006: 13.0 percent

  25. REGION 4 • Union membership decreased to 48,400 in 2006 from 75,600 in 2000 • Tennessee’s union membership declined by 85 percent and Georgia declined by 36 percent • Union membership decreased in all states except for Florida and South Carolina • Union membership in Florida represented 45 percent of the region’s total union membership in 2006

  26. Globalization of Construction • Globalization is where goods, services, workers, technology, ideas, and resources migrate to where they can work most efficiently and profitably • Pay more attention to global economic and political trends • Consider recruiting foreign nationals, working with foreign companies, and forging cross-border supply chains

  27. Construction Industry and Economic Outlook 2007-2008 Jeffry H. Taylor Chief Economist ABC National ABCC and CFMA Triangle Luncheon July 11, 2007

More Related