This is a post from Jim Haughey's blog that covers the US construction industry.

Jim Haughey is the Chief Economist for Reed Construction Data and has over thirty years experience as a business economist, including twenty years monitoring the construction market. He has a Ph.D. degree in economics from the University of Michigan and has previously taught at the University of Michigan, Ohio University, Michigan State University and the University of Massachusetts.

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Construction Industry Forecasts

Notes from Jim Haughey - May 11, 2011

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Consumer willingness to spend not lessened by recession
Jim Haughey, RCD Chief Economist

The lesson from this for the ongoing economic recovery is this: the recession and more restrictive lender practices forced a change in consumer spending behavior but do not appear to have changed consumer spending attitudes. The aggregate credit card balance outstanding declined again in the 1st quarter of 2011 but this is more likely due to fewer cards and further cuts in credit limits than to a new attitude about spending and saving. While the consumer savings rate has jumped from near zero in 2008 to over 5% today, this does not necessarily signal a greater preference for savings by consumers. Instead, a lot of debt has been repaid or written off (this counts as savings) in the last few years.

If consumers have not learned to be more frugal by choice then consumer spending will play a dominant role in driving the economy recovery. So far in the recovery the drivers have been equipment investment, inventory and trade with the consumption contribution lagging. But credit card lenders have begun to make credit easier to get by resuming the expansion of the number of cards and cautiously raising credit limits. This will enable consumers to spend aggressively as they appear to prefer to do. Ahead, consumer spending gains should be enough to offset weakness in public spending, inventory accumulation and trade.

Note:  These thoughts were inspired by a client note from Property & Portfolio Research (P&PR) who are our longtime partners in preparing the forecasts of construction starts.



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Read Other Recent Jim Haughey Posts

08/15 - Contractor Survey: Work backlog rises in 2nd Q but may fall in the summer
08/09 - Modest construction recovery will be supported by two more years of cheap credit
07/29 - Sour economic growth report threatens construction recovery
07/27 - Worry about the deficit not the debt limit
07/27 - Worry about the deficit not the debt limit
07/27 - Worry about the deficit not the debt limit
07/19 - Housing starts rebound.6% in June after two weak months
07/18 - Congress prepares to postpone resolving the deficit crisis assuring an extended period of subpar eco
07/12 - House Transportation Committee proposes to keep federal highway funding at fuel tax receipt level
07/09 - Don’t count on debt limit deal to restart sustained high economic growth
07/08 - Contractors cut 9,000 jobs in June
07/05 - The cost and frustration of selling a home contributes to the delayed housing recovery
07/05 - May construction spending down 0.6%; recovery still on hold
07/01 - FAA stops works on federally funded runway and control tower projects
06/21 - It is not more jobs that will quicken the economic recovery
06/16 - Mays’ 3.5% gain in housing starts does not signal a housing recovery immediately ahead
06/15 - Cautious spending threatens to delay construction recovery
06/10 - Economic and construction recoveries will be subpar for at least another year
06/09 - NYC construction unions may agree to drop expensive work rules to spur more work
06/04 - Contractors add 2,000 jobs in May; overall job gain disappointingly low

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