ABC: Q3 growth in GDP is helping maintain construction industry pace
- A 3% expansion in the U.S. economy's Q3 gross domestic product (GDP), in addition to 3.9% growth in nonresidential fixed investments, should help construction activity remain at a healthy pace for the time being, according to the Associated Builders and Contractors.
- The increase in nonresidential fixed investment reflected greater investment in equipment and intellectual property, rather than in structures. ABC Chief Economist Anirban Basu said that nonresidential inventory got a 0.7% boost, most likely stemming from post-hurricane activity in the quarter.
- Despite the optimistic report, Basu said, positive indicators such as high asset value, confidence, investment and economic activity also occur in the late stages of a cycle. Inflation or an uptick in interest rates potentially could usher in a swing to diminished construction demand.
The scope of what recent hurricanes across the southern U.S. and its territories will mean for the construction industry is still undetermined as insurance companies and the Federal Emergency Management Agency (FEMA) continue to assess the damage. Together, Hurricanes Irma, Harvey and Maria are currently projected to have done nearly $300 billion in damage.
After Irma and Harvey caused such destruction to Texas and Florida, straining FEMA's disaster relief budget, Congress voted to increase funding to the agency by by $15 billion. that was before Hurricanes Nate and Maria struck the U.S. Gulf Coast and Puerto Rico and before Northern California wildfires destroyed more than more than 200,000 acres of homes, farmland and businesses. Fire damage is expected to total at least $65 billion — a figure that prompted federal lawmakers to pass a second relief package last week totaling $36.5 billion.
Despite no firm numbers detailing how much business is in store for construction companies joining in as part of the rebuilding effort, the scant supply of qualified labor is sure to come into play. Many residential builders in the hardest-hit areas were already feeling the strain of the labor shortage before the storms and many are now telling customers that they might have to wait years for the repairs that will allow them to return home.
- Associated Builders and Contractors Construction Industry Benefits From Consecutive Quarterly GDP Gains, Says ABC
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