Sinking Confidence Restrains Construction Outlook
Abstract:
Summer GDP growth will soon be revised from an already high 3.9% to a booming 4.5-5.0% pace. Normally, this would be great news for construction demand — but not this time. The growth spurt is due to accumulating unwanted inventories and slowing import growth to accommodate more cautious consumers. The growth spurt is the prelude to several quarters of 1-2% economic growth, possibly lower, that will stretch out the already long process of absorbing the huge excess of homes for sale, reduce the expected profitability of new commercial buildings and also reduce the growth in tax receipts and investment earnings that finance institutional buildings and public works. The impact on housing will be more immediate than on nonresidential construction spending.
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Summer GDP growth will soon be revised from an already high 3.9% to a booming 4.5-5.0% pace. Normally, this would be great news for construction demand — but not this time. The growth spurt is due to accumulating unwanted inventories and slowing import growth to accommodate more cautious consumers. The growth spurt is the prelude to several quarters of 1-2% economic growth, possibly lower, that will stretch out the already long process of absorbing the huge excess of homes for sale, reduce the expected profitability of new commercial buildings and also reduce the growth in tax receipts and investment earnings that finance institutional buildings and public works. The impact on housing will be more immediate than on nonresidential construction spending.