U.S. construction starts came in slightly below expectations during the third quarter, with stronger activity in the civil engineering sector being more than offset by weaker growth in the residential and nonresidential segments. Residential starts continued to post a healthy pace of annual growth, and the apparent weakness in the nonresidential segment may be overstated due to upward revisions in historical data, according to CMD’s latest quarterly forecast report.
The Q4 forecast, which combines CMD’s proprietary data with macroeconomic factors, showed construction starts are expected to grow 6.8% in 2015, a little less than CMD’s Q3 prediction of 7.1%.
“Domestic activity is driving U.S. growth,” said Alex Carrick, CMD chief economist. “After a slow start in 2015, US GDP recovered strongly in Q2, and robust domestic activity is expected to drive growth over the next few years.”
According to the report, construction starts are expected to grow by 8.4% in 2016, as rising household incomes boost growth in the residential sector and stronger business investment elevates the nonresidential sector. Only civil engineering construction is expected to slow from its heady pace in 2015.
“A good gain in U.S. construction starts in 2015 will accelerate in 2016 and 2017, before settling down in 2018 ,” stated Carrick. “Some moderation in engineering strength, which has been a mainstay of site-work lately, will be compensated by a pick-up in nonresidential building activity. In residential, pent-up demand for new housing continues to accumulate and will soon need addressing.”