Steady Growth in Construction for 2016 Forecasted by FMI

Activity in the construction industry is expected to grow 6% for 2016, according to FMI, a Raleigh, NC-based construction consulting company. FMI adjusted total residential down a bit and nonresidential construction up. The largest growth markets are lodging (14%), office (11%) and commercial (8%); together these three markets represent 33% of nonresidential buildings for 2016.With the exception of commercial construction, all are strong markets but growing slower than in 2015.

FMI’s Second Quarter Nonresidential Construction Index (NRCI) report supported these growth trends. FMI surveyed construction executives via the NRCI survey. These executives increased their optimism to drive the total NRCI Index score from 55.6 in the first quarter to 61.3 in the second quarter.

“Despite all the distractions (Fed rates, oil prices, China, Brexit, terrorism), the construction industry continues to plod along undeterred at a growth rate of 6%," said Randy Giggard, FMI’s Manager, Marketing Information.  "The prudent among us will keep watch for signs of the next recession.  But at this time, it seems most likely that the industry will continue to expand for at least another 18 months.”

Current conditions are looking good for the construction industry:

• Interest rates remain relatively low for borrowers building homes and commercial projects.
• Unemployment remains low, so more people have jobs and are spending money—on the other hand, low unemployment translates into higher wages and difficulties finding workers.
• The consumer price index (CPI) shows little sign of inflation. Oil and energy prices also remain low. The numbers lead us to expect continued growth that could be sustained for several years.

Despite the growth projects, there are still some under lying tension in the market. Oil and gas producers mostly need higher prices to keep people employed and make a profit. This is especially true for those countries that derive most of the country’s income from oil and gas production. The Federal Reserve has been looking for an opportunity to raise interest rates to encourage banks to lend and savers to save, but wages have not shown much sign of rising rapidly for the working class although unemployment remains below 5%. Even though current conditions are mostly good, we can see there is tension in the economy and wonder what changes will come in the summer.

Read more about the FMI Construction Forecast.

(Source Material from FMI)