- The construction industry ought to see stability and more nonresidential spending in 2018, but should remain wary of how issues like rising construction costs could affect it, according to the Associated Builders and Contractors (ABC).
- ABC Chief Economist Anirban Basu said inflation and higher wages, as well as rising healthcare costs and fuel prices, might lead to higher interest rates, which could cool the current pace of construction spending. Industry investment could also slide if property values remain the same or decrease, though the effect would likely not be significant until 2019 or beyond, Basu said.
- Despite potential risk factors, the current construction recovery cycle is still being supported by strong corporate earnings, global economic expansion, high consumer confidence and the potential for a program of tax cuts that could further boost spending.
Construction's growth in the years since the Great Recession has led to an uptick in the country's gross domestic product and helped jumpstart the U.S. economy. Still, rising construction material prices have dampened some industry optimism.
With the exception of iron and steel and steel mill products, prices for all categories of materials the ABC tracks rose year-over-year in November. In its latest input report, the association reported that the month's 5.6% annual increase was the biggest since November 2011. Basu cautioned contractors to consider rising costs during bid preparation.
The ABC also reported this month that project pipelines were at their highest level since the group started tracking this metric eight years ago. Quarter-over -uarter, its third-quarter 2017 Construction Backlog Indicator (CBI) reading increased by 9.8% to 9.45 months. Regionally, the South took the lead with an 11.32-month backlog, while the infrastructure sector boasted a project pipeline of 12.53 months.