Presentation to the National Association of Steel Pipe Distributors Summer Conference in Toronto, Friday, June 7, 2013 on the outlook for commercial construction

1. NASPD 2013 Summer Conference
June 7, 2013

2. Greenbuild 2010
Construction Trends and How
They Will Affect the Steel Pipe
Industry
Presented by: Bernard M. Markstein
Reed U.S. Chief Economist

3. Outlook for Construction
Greenbuild 2010
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4. Outlook for Construction
Greenbuild 2010
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5. Outlook for Construction
Greenbuild 2010
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6. Outlook for Construction
The U.S.
Economy

7. Outlook for Construction
7
Greenbuild 2010
 Economy has been growing at a barely acceptable rate
 Employment growing, but should be faster
 Unemployment rate down, but not always for the right
reasons
 Inflation moderate
 Single-family housing recovering, but from a very low
level
 Multifamily largely recovered
 Lending standards, although improving, remain
relatively tight

8. Outlook for Construction
8
Risks to the
Economy

9. Outlook for Construction
9
Greenbuild 2010
 The federal budget (see you in September?)
 The federal debt ceiling
 Europe
 European government debt default
 The euro
 Energy (oil) prices

10. Outlook for Construction
10
Commercial construction
turned around in 2012
and is expected to
continue to improve

11. Outlook for Construction
11
Greenbuild 2010
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
Residential Nonresidential Building Heavy Construction
$ Billions
History Forecast
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Construction Spending and
its Components

12. Outlook for Construction
12
Greenbuild 2010
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
35
40
45
3-Month Moving Average, Year-over-Year % Change
Reed Total Starts
(3-Mo MA YoY)
Source: Reed Construction Data

13. Outlook for Construction
13
Greenbuild 2010
700
750
800
850
900
950
1,000
1,050
1,100
1,150
1,200
1,250
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Billion $, SAAR
Total Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data

14. Outlook for Construction
14
Residential
construction is
recovering, but
from a low level

15. Outlook for Construction
15
Greenbuild 2010
0
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
2,500
88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
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
Source: U.S. Census Bureau

16. Outlook for Construction
16
Greenbuild 2010
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
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

17. Outlook for Construction
17
Single-family housing
market is showing
solid recovery

18. Outlook for Construction
18
Greenbuild 2010
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Thousands of Units, SAAR
Nation’s long-run (trend) need for
the next decade
High Estimate
(1.45 million starts per year)
Nation’s long-run (trend) need for
the next decade
Low Estimate
(1.15 million starts per year)
Single-Family Housing Starts
Source: U.S. Census Bureau

19. Outlook for Construction
19
Greenbuild 2010
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
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

20. Outlook for Construction
20
The multifamily
construction market is
near normal

21. Outlook for Construction
21
Greenbuild 2010
0
50
100
150
200
250
300
350
400
450
500
88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
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
Source: U.S. Census Bureau

22. Outlook for Construction
22
Greenbuild 2010
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13
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
Source: U.S. Census -Bureau

23. Outlook for Construction
23
Greenbuild 2010
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
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

24. Outlook for Construction
24
Residential
construction
spending

25. Outlook for Construction
25
Greenbuild 2010
0
100
200
300
400
500
600
700
800
02 03 04 05 06 07 08 09 10 11 12 13 14
Improvements Single-family Multifamily
$ Billions
Residential Spending Components
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
History Forecast

26. Outlook for Construction
26
Greenbuild 2010
-60
-50
-40
-30
-20
-10
0
10
20
30
40
50
3-Month Moving Average, Year-over-Year % Change
Reed Residential Starts
(3-Mo MA YoY)
Source: Reed Construction Data

27. Outlook for Construction
27
Greenbuild 2010
100
150
200
250
300
350
400
450
500
550
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Billion $, SAAR
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Construction Spending:
New Residential Construction

28. Outlook for Construction
28
Greenbuild 2010
0
50
100
150
200
250
300
350
400
450
Single-Family Multifamily Improvements
2002 2003 2004 2005 2006
2007 2008 2009 2010 2011
2012 2013 2014
$ Billions
Residential Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data

29. Outlook for Construction
29
Nonresidential building
construction has
struggled lately, but is
expected to perform
better in the second half
of this year and in 2014

30. Outlook for Construction
30
Greenbuild 2010
-40
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
3-Month Moving Average, Year-over-Year % Change
Reed Nonresidential Starts
(3-Mo MA YoY)
Source: Reed Construction Data

31. Outlook for Construction
31
Greenbuild 2010
200
225
250
275
300
325
350
375
400
425
450
475
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Billion $, SAAR
Construction Spending:
Nonresidential Construction
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data

32. Outlook for Construction
32
Greenbuild 2010
Nonresidential Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
0
10
20
30
40
50
60
70
80
90
100
Hotel/Lodging Office Commerical
2002 2003 2004 2005 2006
2007 2008 2009 2010 2011
2012 2013 2014
$ Billions

33. Outlook for Construction
33
Greenbuild 2010
Nonresidential Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
0
10
20
30
40
50
60
70
80
90
100
110
Religious Healthcare Education
2002 2003 2004 2005 2006
2007 2008 2009 2010 2011
2012 2013 2014
$ Billions

34. Outlook for Construction
34
Greenbuild 2010
Nonresidential Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
0
10
20
30
40
50
60
70
Public safety Amusement and recreation Manufacturing
2002 2003 2004 2005 2006
2007 2008 2009 2010 2011
2012 2013 2014
$ Billions

35. Outlook for Construction
35
Heavy engineering
(non-building)
construction held
up best over the
last few years

36. Outlook for Construction
36
Despite considerable
challenges, the outlook
for heavy engineering
construction is fairly
positive

37. Outlook for Construction
37
Greenbuild 2010
Reed Heavy Engineering Starts
(3-Mo MA YoY)
Source: Reed Construction Data
-50
-40
-30
-20
-10
0
10
20
30
40
50
60
70
80
3-Month Moving Average, Year-over-Year % Change

38. Outlook for Construction
38
Greenbuild 2010
Construction Spending:
Heavy Engineering
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
150
175
200
225
250
275
300
325
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Billion $, SAAR

39. Outlook for Construction
39
Greenbuild 2010
Heavy Engineering Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
0
10
20
30
40
50
60
70
80
90
100
110
120
130
Transportation Communication Power
2002 2003 2004 2005 2006
2007 2008 2009 2010 2011
2012 2013 2014
$ Billions

40. Outlook for Construction
40
Greenbuild 2010
Heavy Engineering Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
0
10
20
30
40
50
60
70
80
90
100
110
Highway Water and Sewer Conservation
2002 2003 2004 2005 2006
2007 2008 2009 2010 2011
2012 2013 2014
$ Billions

41. Outlook for Construction
41
A look at regional
economic
performance

42. Outlook for Construction
42
Source: Philadelphia Federal Reserve Bank

43. Outlook for Construction
43
Source: Philadelphia Federal Reserve Bank

44. Outlook for Construction
44
Greenbuild 2010
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45. Outlook for Construction
45
Greenbuild 2010
Contact Information and Links
Bernard M. Markstein
 Office: 301-588-5190
 Mobile: 404-952-3381
 b.markstein@reedbusiness.com
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