Reed Economist outlines construction’s meek recovery

Earlier this month, Reed Construction Data (RCD) held a webcast titled, “A Construction Recovery At Last – But How Long and How Strong?” The webcast featured three leading construction economists:

  • Kermit Baker, Ph.D., who is the chief economist at the American Institute of Architects and also is associated with the Joint Center on Housing Studies (JCHS) at Harvard University.
  • Bernie Markstein, the chief economist at RCD, who spent many years at the National Association of Home Builders
  • Ken Simonson, chief economist at the Associated General Contractors of America.

Each economist made a preliminary presentation; Markstein went first and last. His section included the graphics below that show construction projections through 2013.

Baker projected a healthy upturn for residential remodeling in 2012’s second half (see graphic below). The Leading Indicator of Remodeling Activity (LIRA), is something the JCHS invented and reports on quarterly.

Simonson’s presentation included the slide below, with construction projections out to 2017.

Markstein’s near-term outlook

In the graphic below, the gray shaded area indicates a recession. The red vertical line shows where we are today. RCD divides its analysis of construction spending into residential, non-residential, and heavy engineering—which consists of government projects, stadiums, etc.

As the final graphic seems to show, the RCD forecast is for the construction industry, overall, to be back where it was at the beginning of the previous recovery (the 2003-2004 level) by the end of 2013. It should, however, be seen as a positive forecast since all the lines going out to the end of 2013 have an upward slope.

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