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 - Jul 05, 2011

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May construction spending down 0.6%; recovery still on hold
Jim Haughey, RCD Chief Economist

Early reports for June strongly suggest that the spring stall in the economy is ending. Better results have been reported late in the month for jobs, inflation, consumer spending, equity prices and factory production. Gasoline prices have retreated about $0.40/gal. and resolution of the Greek debt crisis passed an important hurdle when the European Central Bank agreed to make another installment on the loan to Greece. Caution: economic conditions have improved from briefly neutral (possibly slightly negative) back to subpar growth. This reinstates the US GDP outlook in place at the beginning of then year but with a 3-4 month delay. GDP growth will average at most 3.0% through the end of 2012. The construction spending recovery is delayed until midyear.  Construction spending will decline slightly again for the full year 2011 vs. 2010 then improve sharply in 2012. The revised Reed Construction Data forecast will be posted shortly.

What is causing the delay in the economic and construction recoveries?  There are unique problems in housing – the huge oversupply of empty homes – and in public construction – the end of stimulus spending and deficit forced spending cuts. This is on top of the general cause – uncertainty about healthcare, finance and labor-management rules and continued, almost daily, calls by President Obama and congressional democrats for higher taxes on business and high income households. Business managers and high income consumers have to cautiously assume the worst outcome and protect themselves by deferring spending.

These uncertainties will gradually be resolved by compromises or the next election will give one side or the other enough votes to resolve them without compromise. So we will muddle through the rest of 2011 and 2012 with enough economic growth to initiate and sustain a modest construction recovery.

 


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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
07/01 - 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
05/25 - No consensus for 2nd quarter GDP growth

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