AIA Chief Economist's Detailed Mid-Year Analysis
Even with many obstacles preventing full recovery for the U.S. economy, the American Institute of Architects (AIA) says the design and construction industry has reasons to be modestly optimistic in the coming months and into 2013.
A sharp spike in demand for industrial facilities so far this year, along with sustained demand for hotels and retail projects factors into what projects to be a 4.4% rise in spending this year for nonresidential construction projects -- up from a projected 2.1% increase in AIA's January Consensus Forecast. The semi-annual Consensus Construction Forecast, a survey of the nation’s leading construction forecasters, also projects a 6.2% increase of spending in 2013.
“With companies looking to bring back manufacturing jobs from overseas, there has been a sharp rise in demand for industrial facilities, which is leading to an upward revision in projections for future construction spending,” said AIA chief economist, Kermit Baker, PhD, Hon. AIA. “Continued budget shortfalls at the state and local level, along with a depressed municipal bond market are holding the institutional market back from seeing similar upticks in spending.”
|
Market Consensus Growth Forecasts |
2012 |
2013 |
|
Overall nonresidential |
4.4% |
6.2% |
|
Commercial / industrial |
5.7% |
10.2% |
|
12.9% |
8.1% |
|
9.5% |
18.2% |
|
6.2% |
9.0% |
|
4.7% |
8.7% |
|
Institutional |
0.7% |
3.0% |
|
4.0% |
7.5% |
|
0.3% |
1.1% |
|
0.1% |
2.3% |
|
0.0% |
0.1% |
|
-5.0% |
3.0% |
Remarking on risks that could undermine these projections, Baker added, “Federal tax and spending changes – the so-called fiscal cliff – that may come into play in early 2013 could upset the economic applecart and prove detrimental to recovery possibilities. We will likely have a better sense after the presidential election what will happen with regards to the Bush-era tax cuts, Social Security payroll tax, extended unemployment, and deficit reduction plans that will have a ripple effect that will extend to the construction industry.”
The AIA Consensus Construction Forecast Panel is conducted twice a year with the leading nonresidential construction forecasters in the United States including, McGraw Hill Construction, Wells Fargo Securities, IHS-Global Insight, Moody’s economy.com, Reed Business Information, Associated Builders & Contractors and FMI. The purpose of the Consensus Construction Forecast Panel is to project business conditions in the construction industry over the coming 12 to 18 months. The Consensus Construction Forecast Panel has been conducted for 13 years.
