At SteelOrbis’ 11th annual Rebar & Wire Rod conference in Las Vegas on Feb. 3, 2020, Ken Simonson, Chief Economist for the Associated General Contractors of America (AGC), said that while some construction segments will see lower spending in 2020, the overall construction outlook is positive.
Simonson said federal infrastructure spending won’t occur until at least 2021 or later, pointing out that it likely won’t matter which political party is in power. However, there are still many new and ongoing public projects such as transit construction/reconstruction, water and sewer/wastewater, and state highway funding and toll projects. Along with increased private construction spending—specifically solar and wind power and communication—regional public projects are also helping to mitigate the relative lack of new federal spending
The AGC’s forecast for nonresidential spending in 2020 is a 0-4 percent increase, while residential construction spending is expected to increase by 2-7 percent. Complicating the residential sector, Simonson said, is the implications of population change in the US. According to AGC data, US population growth in 2019 of 0.48 percent was the slowest since 1918; 10 states lost population and growth slowed in 32 states and D.C.
Another complicating factor in the overall construction industry continues to be labor shortages, Simonson said. An AGC survey of contractor firms in the US indicated that while 75 percent plan to add workers in 2020, 81 percent expect to find continued difficulty in finding workers. As a result of the shortage, 44 percent of firms said they expect costs to be higher than anticipated in 2020 and 40 percent said projects will take longer than expected. Simonson said serious immigration reform could help with the labor shortage, but he doesn’t expect legislation to be forthcoming, at least with the current administration.
Material costs are another factor affecting forecasts. Steel mill products increased for construction firms by 19 percent in 2018, then dropped 16 percent in 2019. Simonson said the fluctuation in material costs did not have a significant impact on construction demand, but the uncertainty has made firms cautious about bid pricing for future projects.
In summary, Simonson said overall US construction spending is expected to increase 1-5 percent in 2020, the inputs PPI for goods and services is expected to increase 3-4 percent, and wages and salaries for construction workers is expected to increase 3.5-4.5 percent, pointing to a positive overall trend for the US construction industry in 2020.