Forecast: CMD Predicts 7.4% Increase in 2016 New Construction Starts

U.S. construction starts increased 7.4%, higher than expected in the first quarter of 2016. On the heels of a 5.8% gain in 2015, residential starts and nonresidential starts are tracking positively for the second quarter, according to CMD’s latest quarterly forecast report.
 
The forecast, which combines CMD’s proprietary data with macroeconomic factors, expects a total year-over-year dollar volume increase of 7.4% this year, which is slightly higher than the 6.5% increase that was expected in the Q1 forecast.
 
Nonresidential building structures that will see the fastest percentage gains in 2016 include office buildings, transportation terminals and hospitals/clinics. Roads and bridges are also expected to perform well.
 
“Over the last several years, including 2016, the first quarter has proven challenging for the U.S. economy, slowing advances in national output,” said Alex Carrick, CMD chief economist. “Forward momentum has more often gathered in later quarters, giving rise to encouraging gross domestic product (GDP) improvements deeper into the calendar.”
 
According to the report, the increased pace for construction in 2016 is due to positive starts in both nonresidential building and civil engineering starts, which are predicted to increase 5.4% and 1.5% respectively.
 
“The construction sector traditionally lags GDP change and in the current cycle, the effect has been more pronounced than usual. Inevitably, too-long delayed capital spending leads to an accumulation of pent-up demand and an onset of construction investment. That stage is now underway,” said Carrick.
 
By 2020 — the end of CMD’s forecast period — total value of construction starts, based mainly on the summation of actual projects, will be in excess of $700 billion.