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FMI Q3-2014 Outlook: Economy Improving Slowly

FMI released its Q3-2014 Construction Outlook. The forecast calls for solid, slow growth.

Contributing factors include relatively low energy prices, low inflation, unemployment holding around 6.2 percent and GDP slowly growing. Additionally, consumer confidence is rising steadily, building permits and housing starts bounced back in July, and banks are starting to lend again, that is, if the applicant has good credit and cash flow.

Therefore, sectors such as power, conservation and development, as well as transportation will continue to see growth ahead of GDP. However, water supply, sewage and waste disposal, and highway and street construction will be weaker as government spending is not expected to pick up significantly in the near term. Additional select market predictions include:

  • Residential – Multifamily construction is still expected to grow at a healthy pace of 13 percent in 2015 after reaching a near-record pace in 2014. The inventory for new homes increased to six months in July, showing some weakness in sales, but housing starts in July were 21.7 percent above July 2013 levels.
  • Office – Dropping unemployment rates and rising GDP have provided a lift in the office forecast now expected to reach 8 percent growth in 2014 and grow an additional 7 percent in 2015. Large metropolitan areas like New York City will benefit the most, as vacancy rates drop to 10.6 percent compared with national vacancy rates hovering around the 16 to 17 percent range.
  • Manufacturing – Improvements in manufacturing construction have been a surprise to many as the sector has been riding a roller coaster since the recession. After a flat 2013, the forecast calls for 2014 to end up 6 percent, growing an additional 8 percent in 2015.
  • Transportation – Transportation construction also continues at a solid pace with 7 percent growth in 2014.