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Forecasters Temper their Optimism in Updated AIA Construction Forecast

July 25, 2017
The updated AIA Consensus Construction Forecast projects annual growth in the 3.5% to 4% range for the remainder of 2017 as well as for 2018, with a slower growing commercial/industrial market, and an institutional sector facing several challenges.

The updated AIA Consensus Construction Forecast projects annual growth in the 3.5% to 4% range for the remainder of 2017 as well as for 2018, with a slower growing commercial/industrial market, and an institutional sector facing several challenges. While a press release issued by the American Institute of Architects (AIA), Washington, D.C., said some slowdown in the commercial sector was anticipated for 2017 and 2018, it was expected to be offset by acceleration in the institutional sector. However, year-to date growth in spending for institutional buildings is at only 3%, well below expectations when the year began.

Published annually by AIA, the Consensus Construction Forecast incorporates the forecasts of the nation's leading construction forecasters: Dodge Data & Analytics, IHS Economics, Moody's Economy.com, FMI, ConstructConnect, Associated Builders and Contractors and Wells Fargo Securities. You can access the individual forecasts and analysis by Kermit Baker, AIA's chief economist at http://bit.ly/2uTYKWx.

Baker said that despite billings at architecture firms performing quite well this year, the larger construction industry is facing a range of issues. “The somewhat weaker outlook is driven by several factors, some dealing with the broader U.S. economy, some dealing with general construction industry fundamentals, and some dealing with weakness in specific construction sectors,” he said in the press release.

In his analysis of the forecast at www.aia.org, Baker said some key factors in the less optimistic forecast was the lack of progress in Washington, D.C., on several pieces of legislation that construction industry executives and economists thought would help pump up construction spending.

Said Baker in his post, “Entering 2017, construction forecasters were quite optimistic about the near-term outlook for the industry. Not only was 2016 ending up with strong construction spending numbers 6% across the entire nonresidential building sector, paced by more than 10% in the commercial categories — but 2017 was expected to be the year that federal fiscal policy would provide even more momentum for this market. Tax reform and financial deregulation were going to unleash investment capital, and the repeal and replacement of the Affordable Care Act was going to reduce financial burdens on small businesses. To top it off, a trillion-dollar infrastructure program over the coming decade would directly undergird strong construction growth for the foreseeable future.

“However, as of the mid-year 2017 update, the grounds of this euphoria are evaporating. Our economy has seen only about 2% growth (when annualized) over the first half of the year, and key elements of the Trump administration’s legislative agenda have made almost no progress.”

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