Outlook 2016: Slow and Modest vs. Fast and Furious
The energy sector gave construction starts a furious burst this year, but as that fades, the recovery will maintain its modest pace, with economists calling for further growth in 2016
After a tentative start, the construction recovery hit full stride this year, and it is expected to keep pace in 2016, according to economists surveyed by ENR. The consensus among these economists is very tight. Dodge Data & Analytics forecasts a 6% increase in total construction starts next year, while both FMI and the Portland Cement Association (PCA) are looking for a 7% increase in construction put-in-place in 2016.
At first glance, Dodge’s 6% prediction may look like a slowdown in growth, compared to this year’s 13% jump in starts. However, this year’s starts got a tremendous boost from a flurry of megaprojects in the energy sector for powerplants and new liquefied-natural-gas facilities. “If you remove the highly volatile energy sector, total construction starts would be up 8% this year,” says Robert Murray, Dodge’s chief economist. That caveat puts the forecast for a 6% increase in construction starts for 2016 in line with a slow and modest recovery. “We see 2016 as another step in the expansion process that still has a few more years to go,” Murray says. “Next year’s 6% increase is more of a pulling back from a surprising upturn in 2015, as opposed to [the uptick indicating] the market losing momentum,” he adds.