IMF: construction progresses, expect boom of 2023
While there isn’t a big recovery in the construction economy this year, there is at least some progress going forward, according to the IMF’s 2021 Engineering and Construction Third Quarter Outlook report. Given a controversial election and a pandemic, any progress is probably a good thing.
And for transport construction, the outlook becomes particularly bright after 2022.
Total engineering and construction spending for the United States is expected to end 2021 up 2%, from 5% in 2020, according to the report.
Investment in the residential sector, particularly the construction and renovation of single-family homes, is the main driver of construction spending. Water supply is the only non-residential segment expected to experience strong growth this year with a likely gain of five percent.
Multi-family residences, healthcare, communications, manufacturing, highways and streets, and sewage and waste disposal are considered stable and are expected to end the year with growth at about the rate of inflation, between 0% and 4%. The mixed public and private segments are expected to end the year with growth roughly in line with inflation and are also considered stable.
In the third quarter of last year, the Non-Residential Construction Index (NRCI) fell below 40, the only time since the Great Recession of 2008-09. There is no doubt that the drop is the result of the Corona virus pandemic, government confusion over how to handle it, and widespread layoffs and lockdowns.
For the third quarter of 2021, the index is up sharply to 59.7, suggesting continued and heightened optimism as the rest of the year approaches. According to IMF, the most recent reading suggests an increase in engineering and construction opportunities ahead. (Scores above 50 indicate improving or expanding conditions in the industry. A score of 50 represents conditions that remain the same. Below 50, conditions worse than last quarter.)
The house builders in tears
Compared to last year, the single-family home is clearly the winner with an 8% growth forecast, driven by a rise in the Consumer Price Index, historically low mortgage rates and a lack of inventory.
The biggest loser across all segments is the homebuilding industry, down 18% from $ 23.5 billion and expected to drop to $ 21.7 billion next year
In terms of real amounts, residential construction spending is estimated at $ 660 billion this year. Non-residential construction will peak at $ 524 billion, non-real estate structures at $ 281 billion.
While transport construction is in negative territory this year, it is expected to increase by 2% next year and 9%, 13% and 14% in subsequent years, making it the best performing year over year. ‘other by 2025.
The total construction put in place in the United States in 2021 is expected to amount to $ 1,455 billion. By 2025, this estimate climbs to $ 1,776 billion.
You can download the full report here.