Charts on residential and nonresidential construction presented to the Associated General Contractors of America (AGC) Financial Issues Forum June 19, 2014

1. AGC Financial Issues Forum
June 19, 2014

2. ECONOMIC OUTLOOK
Presented by: Bernard M. Markstein
Reed U.S. Chief Economist

3. 3

4. 4

5. 5

6. 6

7. Economic Outlook
7
The U.S.
Economy

8. Economic Outlook
8
State of the U.S. Economy
 Economy improving, but weather muddles the numbers.
What is really going on?
 Employment growing, but should be faster
 Inflation moderate (too low?)
 The Fed has started to taper
 Housing/residential construction a positive

9. Economic Outlook
9
Risks to the Economy
 Energy (oil) prices
 The Fed and interest rates
 Significant cuts in government spending in the near term
 Europe
 European government debt default
 The euro

10. Economic Outlook
10
Construction
Outlook

11. Economic Outlook
11
700
750
800
850
900
950
1,000
1,050
1,100
1,150
1,200
1,250 Billion $, SAAR
Total Construction Spending
(3 Month Moving Average)
Source: History – U.S. Census Bureau

12. Economic Outlook
12
-40
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
3-Month Moving Average, Year-over-Year % Change
Reed Total Starts
(3-Mo MA YoY)
Source: Reed Construction Data

13. Economic Outlook
13
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
1,300
1,400
02 03 04 05 06 07 08 09 10 11 12 13 14 15
Residential Nonresidential Building Heavy Construction
$ Billions
History
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Forecast
Forecast: Construction to improve
Construction Spending and its Components

14. Economic Outlook
14
Residential construction is
recovering, but from a low level
 Single-family housing market is on the mend, but much
further to go before it is back to normal
 Multifamily market has largely recovered, but still some
room for growth

15. Economic Outlook
15
0
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
2,500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Thousands of Units, SAAR
Nation’s long-run (trend)
need for the next decade
Low Estimate
(1.4 million starts per year)
Nation’s long-run (trend)
need for the next decade
High Estimate
(1.8 million starts per year)
Total Housing Starts
(3-Month Moving Average)
Source: U.S. Census Bureau

16. Economic Outlook
16
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Thousands of Units, SAAR
Nation’s long-run (trend)
need for the next decade
Low Estimate
(1.15 million starts per year)
Nation’s long-run (trend)
need for the next decade
High Estimate
(1.45 million starts per year)
Single-Family Housing Starts
(3-Month Moving Average)
Source: U.S. Census Bureau

17. Economic Outlook
17
0
50
100
150
200
250
300
350
400
450
500
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Thousands of Units, SAAR
Nation’s long-run (trend)
need for the next decade
Low Estimate
(250,000 starts per year)
Nation’s long-run (trend)
need for the next decade
High Estimate
(350,000 starts per year)
Multifamily Housing Starts
(3-Month Moving Average)
Source: U.S. Census Bureau

18. Economic Outlook
18
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
Thousands of Units, SAAR
Nation’s long-run (trend)
need for the next decade
High Estimate
(350,000 starts per year)
Nation’s long-run (trend)
need for the next decade
Low Estimate
(250,000 starts per year)
Multifamily Housing Starts
(3-Month Moving Average)
Source: U.S. Census -Bureau

19. Economic Outlook
19
100
150
200
250
300
350
400
450
500
550 Billion $, SAAR
New Residential Construction Spending
(3 Month Moving Average)
Source: History – U.S. Census Bureau

20. Economic Outlook
20
-60
-50
-40
-30
-20
-10
0
10
20
30
40
50
60
3-Month Moving Average, Year-over-Year % Change
Reed Residential Starts
(3-Mo MA YoY)
Source: Reed Construction Data

21. Economic Outlook
21
0
100
200
300
400
500
600
700
800
02 03 04 05 06 07 08 09 10 11 12 13 14 15
Improvements Single-family Multifamily
$ Billions
Residential Spending Components
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
History Forecast

22. Economic Outlook
22
0
50
100
150
200
250
300
350
400
450
Single-Family Multifamily Improvements
$ Billions
2006 to 2013 ’14 ’15
Residential Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data

23. Economic Outlook
23
Nonresidential
Building
Construction

24. Economic Outlook
24
200
250
300
350
400
450
500 Billion $, SAAR
Nonresidential Construction Spending
(3 Month Moving Average)
Source: History – U.S. Census Bureau

25. Economic Outlook
25
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
3-Month Moving Average, Year-over-Year % Change
Reed Nonresidential Building Starts
(3-Mo MA YoY)
Source: Reed Construction Data

26. Economic Outlook
26
275 269
283
302
340
404
438
376
290
284
298 299
310
336
0
50
100
150
200
250
300
350
400
450
500
550
02 03 04 05 06 07 08 09 10 11 12 13 14 15
$ Billions
History
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Forecast
Nonresidential Construction Spending

27. Economic Outlook
27
0
10
20
30
40
50
60
70
80
90
100
Hotel/Lodging Office Commercial
$ Billions
2006 to 2013 ’14 ’15
Nonresidential Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data

28. 28
0
10
20
30
40
50
60
70
80
90
100
110
Manufacturing Healthcare Education
$ Billions
2006 to 2013 ’14 ’15
Nonresidential Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data

29. Economic Outlook
29
Heavy engineering

30. Economic Outlook
30
125
150
175
200
225
250
275
300
325 Billion $, SAAR
Heavy Engineering Construction Spending
(3 Month Moving Average)
Source: History – U.S. Census Bureau

31. Economic Outlook
31
Reed Heavy Engineering Starts
(3-Mo MA YoY)
Source: Reed Construction Data
-40
-30
-20
-10
0
10
20
30
40
50
60
3-Month Moving Average, Year-over-Year % Change

32. Economic Outlook
32
171 171 169
185
208
248
272 274
265
251
272
263
275
299
0
50
100
150
200
250
300
350
400
02 03 04 05 06 07 08 09 10 11 12 13 14 15
$ Billions
History
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Forecast
Heavy Engineering Construction Spending

33. Economic Outlook
33
0
10
20
30
40
50
60
70
80
90
100
110
120
Transportation Communication Power
$ Billions
2006 to 2013 ’14 ’15
Heavy Engineering Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data

34. Economic Outlook
34
0
10
20
30
40
50
60
70
80
90
100
Highway Water and Sewer Conservation
$ Billions
2006 to 2013 ’14 ’15
Heavy Engineering Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data

35. Economic Outlook
35
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 web
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36. Economic Outlook
36
Contact Information and Links
Bernard M. Markstein
 Office: 301-588-5190
 Mobile: 404-952-3381
 b.markstein@reedbusiness.com
 U.S. Forecast and Commentary:
http://www.reedconstructiondata.com/market-
intelligence/articles/
 Blog:
http://www.reedconstructiondata.com/market-
intelligence/bernie-markstein/