2016 forecast: Continued growth expected for the construction industry

Despite a weak global economy, the industry's solid economic recovery in 2015 should continue in 2016, led by strong consumer spending, according to the 2016 construction industry forecast from the Associated Builders and Contractors (ABC).

The group forecasts growth in nonresidential construction spending of 7.4% next year, along with growth in employment and backlog.

"The mid-phase of the recovery is typically the lengthiest part and ultimately gives way to the late phase, when the economy overheats,” ABC Chief Economist Anirban Basu said. "Already, signs of overheating are evident, particularly with respect to emerging skills shortages in key industry categories such as trucking and construction."

Basu said that average hourly earnings across all industries are up only 2% in the past year, below the Federal Reserve's goal of 3.5%. Purchase prices in real estate and technology segments are rocketing higher and capitalization rates remain unusually low.

According to the most recent ABC Construction Confidence Index, overall contractor confidence has increased with respect to both sales (67.3 to 69.4) and profit margins (61 to 62.9). While the pace of hiring is not expected to increase rapidly during the next six months, largely because of the lack of suitably trained skilled personnel, the rate of new hires will continue at a steady pace.

ABC's Construction Backlog Indicator also signals strong demand. According to the latest survey, average contractor backlog stood at 8.5 months by mid-year 2015, with backlog surging in the western United States and the heavy industrial category.

Basu's full forecast is available in the December edition of ABC's Construction Executive magazine, along with the regional outlook for commercial and industrial construction by economist Bernard Markstein, PhD. Free subscriptions are available to construction industry professionals.