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Charts from a presentation I made to the National Association of Pipe Fabricators (NAPF) Annual Meeting Feb 28, 2014 on the outlook for construction with an emphasis on residential and water & sewer
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NAPF Annual Meeting
February 28, 2014
Outlook for the Economy and
Construction
Presented by: Bernard M. Markstein
Reed U.S. Chief Economist
3
4
5
6
Outlook for the Economy and Construction
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The U.S. Economy
Outlook for the Economy and Construction
8
State of the U.S. Economy
Economy improving, but weather muddles the numbers.
What is really going on?
Employment growing, but should be faster
Inflation moderate (too low?)
The Fed has started to taper
Housing/residential construction a positive
Outlook for the Economy and Construction
9
Risks to the Economy
The Fed and interest rates
Significant cuts in government spending in the near term
Europe
European government debt default
The euro
Energy (oil) prices
Outlook for the Economy and Construction
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-40
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
303-Month Moving Average, Year-over-Year % Change
Reed Total Starts (3-Mo MA YoY)
Source: Reed Construction Data
Outlook for the Economy and Construction
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0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
1,300
1,400
02 03 04 05 06 07 08 09 10 11 12 13 14 15
Residential Nonresidential Building Heavy Construction
$ Billions
History
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Forecast
Forecast: Construction to improve Construction Spending and its Components
Outlook for the Economy and Construction
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Residential construction is
recovering, but from a low level
Single-family housing market is on the mend, but much
further to go before it is back to normal
Multifamily market has largely recovered, but still some
room for growth
Outlook for the Economy and Construction
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0
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
2,500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Thousands of Units, SAAR
Nation’s long-run (trend)
need for the next decade
Low Estimate
(1.4 million starts per year)
Nation’s long-run (trend)
need for the next decade
High Estimate
(1.8 million starts per year)
Total Housing Starts (3-Month Moving Average)
Source: U.S. Census Bureau
Outlook for the Economy and Construction
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0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Thousands of Units, SAAR
Nation’s long-run (trend)
need for the next decade
Low Estimate
(1.15 million starts per year)
Nation’s long-run (trend)
need for the next decade
High Estimate
(1.45 million starts per year)
Single-Family Housing Starts (3-Month Moving Average)
Source: U.S. Census Bureau
Outlook for the Economy and Construction
15
0
50
100
150
200
250
300
350
400
450
500
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Thousands of Units, SAAR
Nation’s long-run (trend)
need for the next decade
Low Estimate
(250,000 starts per year)
Nation’s long-run (trend)
need for the next decade
High Estimate
(350,000 starts per year)
Multifamily Housing Starts (3-Month Moving Average)
Source: U.S. Census Bureau
Outlook for the Economy and Construction
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0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
Thousands of Units, SAAR
Nation’s long-run (trend)
need for the next decade
High Estimate
(350,000 starts per year)
Nation’s long-run (trend)
need for the next decade
Low Estimate
(250,000 starts per year)
Multifamily Housing Starts (3-Month Moving Average)
Source: U.S. Census -Bureau
Outlook for the Economy and Construction
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-60
-50
-40
-30
-20
-10
0
10
20
30
40
503-Month Moving Average, Year-over-Year % Change
Reed Residential Starts (3-Mo MA YoY)
Source: Reed Construction Data
Outlook for the Economy and Construction
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0
100
200
300
400
500
600
700
800
02 03 04 05 06 07 08 09 10 11 12 13 14 15
Improvements Single-family Multifamily
$ Billions
Residential Spending Components
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
History Forecast
Outlook for the Economy and Construction
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0
50
100
150
200
250
300
350
400
450
Single-Family Multifamily Improvements
$ Billions
2006 to 2013 ’14 ’15
Residential Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Outlook for the Economy and Construction
20
Nonresidential
Building
Construction
Outlook for the Economy and Construction
21
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
303-Month Moving Average, Year-over-Year % Change
Reed Nonresidential Starts (3-Mo MA YoY)
Source: Reed Construction Data
Outlook for the Economy and Construction
22
275 269 283
302
340
404
438
376
290 284
298 299 317
343
0
50
100
150
200
250
300
350
400
450
500
550
02 03 04 05 06 07 08 09 10 11 12 13 14 15
$ Billions
History
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Forecast
Nonresidential Construction Spending
Outlook for the Economy and Construction
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Heavy engineering
Outlook for the Economy and Construction
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Reed Heavy Engineering Starts (3-Mo MA YoY)
Source: Reed Construction Data
-40
-30
-20
-10
0
10
20
30
40
50
603-Month Moving Average, Year-over-Year % Change
Outlook for the Economy and Construction
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171 171 169
185
208
248
272 274 265
251
272 263
278
300
0
50
100
150
200
250
300
350
400
02 03 04 05 06 07 08 09 10 11 12 13 14 15
$ Billions
History
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Forecast
Heavy Engineering Construction Spending
Outlook for the Economy and Construction
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0
10
20
30
40
50
60
70
80
90
100
110
120
Transportation Communication Power
$ Billions
2006 to 2013 ’14 ’15
Heavy Engineering Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Outlook for the Economy and Construction
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0
10
20
30
40
50
60
70
80
90
100
Highway Water and Sewer Conservation
$ Billions
2006 to 2013 ’14 ’15
Heavy Engineering Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Outlook for the Economy and Construction
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Regional economic
performance
Outlook for the Economy and Construction
29 Source: Philadelphia Federal Reserve Bank
Outlook for the Economy and Construction
30 Source: Philadelphia Federal Reserve Bank
Outlook for the Economy and Construction
31
Connect with Reed Construction Data
Twitter twitter.com/Bmarkstein
Twitter twitter.com/ReedConstrData
Facebook www.facebook.com/Reed-Construction-Data
LinkedIn www.linkedin.com/company/reed-construction-data
web www.reedconstructiondata.com
Outlook for the Economy and Construction
32
Contact Information and Links
Bernard M. Markstein
Office: 301-588-5190
Mobile: 404-952-3381
U.S. Forecast and Commentary: http://www.reedconstructiondata.com/market-
intelligence/articles/
Blog: http://www.reedconstructiondata.com/market-
intelligence/bernie-markstein/
