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May 7, 2014 U.S. Economic and Construction Outlook Presented by: Bernard M. Markstein, Ph.D. Markstein Advisors Associated Builders and Contractors Washington, D.C. January 30, 2017
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May 7, 2014
U.S. Economic and
Construction Outlook
Presented by:
Bernard M. Markstein, Ph.D.
Markstein Advisors
Associated Builders and Contractors
Washington, D.C.
January 30, 2017
Markstein Advisors 2
Associated Builders and Contractors
The U.S.
Economy
Markstein Advisors 3
Associated Builders and Contractors
Economy growing, but should be faster
Employment growing, but should be better
Inflation remains moderate
Federal Reserve raising interest rates: how high,
how fast?
Strong dollar: pluses & minuses
Energy (oil) prices
Overview of the Economy
Markstein Advisors 4
Associated Builders and Contractors
Washington: A big question mark. How much
cooperation between the new administration
and Congress?
What are the details of the administration’s
economic proposals? A big unknown (the devil
is in the details!)
China: slow(er) economic growth impact on
world economy
Europe showing signs of improvement but total
impact of Brexit is an unknown
Overview of the Economy
Markstein Advisors 5
Associated Builders and Contractors Risks to the Economy (1/2)
Disruptions from increased tariffs/trade war
China
EU – Brexit?
Approaching full employment?
Inflation/Interest rates (the Fed)
Tax reform
Markstein Advisors 6
Associated Builders and Contractors Risks to the Economy (2/2)
Energy (oil) prices
European government debt default (Greece)
The euro (Greece)
Russia?
Failure to pass needed legislation leads to reduced
federal government spending/shut down
Markstein Advisors 7
Associated Builders and Contractors
Construction
Overview
Markstein Advisors 8
Associated Builders and Contractors
47%
32%
20%
2002
Residential
Nonresidential Building
Heavy Construction
53%
29%
18%
2006
Residential
Nonresidential Building
Heavy Construction
2002 Total - $848 Billion 2006 Total - $1,167 Billion
Construction Spending Components
Source: U.S. Census Bureau
Overview of Construction
Markstein Advisors 9
Associated Builders and Contractors
53%
29%
18%
2006
Residential
Nonresidential Building
Heavy Construction
31%
36%
33%
2010
Residential
Nonresidential Building
Heavy Construction
2006 Total - $1,167 Billion 2010 Total - $809 Billion
Construction Spending Components
Source: U.S. Census Bureau
Overview of Construction
Markstein Advisors 10
Associated Builders and Contractors
53%
29%
18%
2006
Residential
Nonresidential Building
Heavy Construction
40%
34%
26%
2015
Residential
Nonresidential Building
Heavy Construction
2006 Total - $1,167 Billion 2015 Total - $1,112 Billion
Construction Spending Components
Source: U.S. Census Bureau
Overview of Construction
Markstein Advisors 11
Associated Builders and Contractors
47%
32%
20%
2002
Residential
Nonresidential Building
Heavy Construction
40%
34%
26%
2015
Residential
Nonresidential Building
Heavy Construction
2002 Total - $848 Billion 2015 Total - $1,112 Billion
Construction Spending Components
Source: U.S. Census Bureau
Overview of Construction
Markstein Advisors 12
Associated Builders and Contractors
0
200
400
600
800
1,000
1,200
1,400
1,600
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Residential Nonresidential Building Heavy Construction
$ Billions
History
Source: History – U.S. Census Bureau; Forecast – Markstein Advisors
Forecast
Forecast: The Recovery ContinuesConstruction Spending and its Components
Overview of Construction
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Associated Builders and Contractors
Residential
Construction
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Associated Builders and Contractors
0
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
2,500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Thousands of Units, SAAR
Nation’s long-run (trend)
need for the next decade
Low Estimate
(1.4 million starts per year)
Nation’s long-run (trend)
need for the next decade
High Estimate
(1.8 million starts per year)
1.22 million
Total Housing Starts(3-Month Moving Average)
Source: U.S. Census Bureau
Shaded areas represent recession
Overview of Housing
Markstein Advisors 15
Associated Builders and Contractors
0
50
100
150
200
250
300
350
400
450
500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Thousands of Units, SAAR
Nation’s long-run (trend)
need for the next decade
Low Estimate
(250,000 starts per year)
Nation’s long-run (trend)
need for the next decade
High Estimate
(350,000 starts per year)
386k
Multifamily Housing Starts(3-Month Moving Average)
Source: U.S. Census Bureau
Shaded areas represent recession
Overview of Housing
Markstein Advisors 16
Associated Builders and Contractors
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Thousands of Units, SAAR
Nation’s long-run (trend)
need for the next decade
Low Estimate
(1.15 million starts per year)
Nation’s long-run (trend)
need for the next decade
High Estimate
(1.45 million starts per year)
830k
Single-Family Housing Starts(3-Month Moving Average)
Source: U.S. Census Bureau
Shaded areas represent recession
Overview of Housing
Markstein Advisors 17
Associated Builders and Contractors
The Forecast
Markstein Advisors 18
Associated Builders and Contractors
402
451
538
618 620
500
367
256 252 253276
329
375
440462
497
0
50
100
150
200
250
300
350
400
450
500
550
600
650
700
750
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
$ Billions
History Forecast
Residential Construction Spending
Residential Construction Outlook
Source: History – U.S. Census Bureau
Forecast – Markstein Advisors
Markstein Advisors 19
Associated Builders and Contractors
0
50
100
150
200
250
300
350
400
450
Single-Family Multifamily Improvements
$ Billions
2006 to 2015 ’16 ’17
Residential Construction Spending
Residential Construction Outlook
Source: History – U.S. Census Bureau
Forecast – Markstein Advisors
Markstein Advisors 20
Associated Builders and Contractors
3840
45
53
5956
52
37
2524
29
37
47
59
67
72
0
10
20
30
40
50
60
70
80
90
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
$ Billions
History Forecast
Multifamily Construction Spending
Residential Construction Outlook
Source: History – U.S. Census Bureau
Forecast – Markstein Advisors
Markstein Advisors 21
Associated Builders and Contractors
266
311
378
434416
305
186
105 113 108
132
171194
233243
267
0
50
100
150
200
250
300
350
400
450
500
550
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
$ Billions
History Forecast
Single-family Construction Spending
Residential Construction Outlook
Source: History – U.S. Census Bureau
Forecast – Markstein Advisors
Markstein Advisors 22
Associated Builders and Contractors
Nonresidential
Building
Construction
Markstein Advisors 23
Associated Builders and Contractors
275 269283
302
340
404
439
377
292284
301 303
333
379
409
432
0
50
100
150
200
250
300
350
400
450
500
550
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
$ Billions
History Forecast
Source: History – U.S. Census Bureau; Forecast – Markstein Advisors
Nonresidential Construction
Nonresidential Construction Spending
Markstein Advisors 24
Associated Builders and Contractors
0
10
20
30
40
50
60
70
80
90
100
110
120
Hotel/Lodging Office Commercial
$ Billions
2006 to 2015 ’16 ’17
Nonresidential Construction Spending
Source: History – U.S. Census Bureau; Forecast – Markstein Advisors
Nonresidential Construction
2015 2016 2017
For Lease (Billions of Current $s) 144 169 183
Year-over-year % Change 14% 18% 8%
Lodging 22 27 29
30% 25% 5%
Office 55 69 78
18% 25% 13%
Commercial (mainly retail) 67 74 77
6% 10% 4%
Markstein Advisors 25
Associated Builders and Contractors
0
10
20
30
40
50
60
70
80
90
100
110
120
Manufacturing Healthcare Education
$ Billions
2006 to 2015 ’16 ’17
Nonresidential Construction Spending
Source: History – U.S. Census Bureau; Forecast – Markstein Advisors
Nonresidential Construction
2015 2016 2017
Mfg (Billions of Current $s) 78 75 75
33% -3% 0%
Health Care 41 41 43
5% 1% 3%
Education 84 89 96
5% 6% 8%
Markstein Advisors 26
Associated Builders and Contractors
Heavy Engineering
Construction
Markstein Advisors 27
Associated Builders and Contractors
171 171 169185
208
248
272 274265
251
274 274
298 294 292299
0
50
100
150
200
250
300
350
400
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
$ Billions
History Forecast
Source: History – U.S. Census Bureau; Forecast – Markstein Advisors
Heavy Engineering Construction Spending
Heavy Engineering Construction
Markstein Advisors 28
Associated Builders and Contractors Contact Info and Links
Bernard M. Markstein
Office: 301-588-5190
www.linkedin.com/in/markstein3
@BMarkstein
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