Looks like it’s time to check in on the latest economic reports for the AEC industries where more improvement is expected in most markets going into 2014. McGraw Hill Construction, a division of McGraw Hill Financial, reported a seasonally adjusted annual rate of $490.2 billion in new construction starts for August, marking a 2% increase relative to July.
McGraw Hill reported that residential building stayed on the upward track, and nonbuilding construction (public works and electric utilities) managed to rebound from its loss of momentum in July. Still, nonresidential building retreated from its improved July amount, continuing the up-and-down pattern that’s been present during 2013. For the first eight months of 2013, total construction starts on an unadjusted basis came in at $329.4 billion, up 1% from the same period a year ago.
Meanwhile, the Equipment Leasing & Finance Foundation’s September 2013 Monthly Confidence Index for the Equipment Finance Industry held steady.
- 30.3% of executives responding said they believe business conditions will improve over the next four months, down from 32.4% in August; 66.7% of respondents believe business conditions will remain the same over the next four months, down from 67.6% in August; 3% believe business conditions will worsen, up from no one who believed so the previous month.
When asked about the outlook for the future, MCI survey respondent Russell Nelson, president, CoBank Farm Credit Leasing, said:
“Stable to slightly favorable economic news, combined with rising equipment costs and interest rates, are driving a continued increase in capital expenditures within a number of industries. Current tax advantages, flexible structures and terms, used equipment values, and attractive fixed rates are contributing to another strong year for equipment financing in 2013, with potential increasing momentum into 2014.”
Coming in with a slightly downbeat report for 2013, but with more optimism in 2014, was FMI, a leading provider of management consulting and investment banking to the engineering and construction industry, that is predicting annual Construction-Put-Place for 2013 to be $909.6 billion, down nearly $4 billion from previous predictions. Early forecasts for 2014 show annual CPIP continues moderate growth of 7%, rising to $977 billion. FMI broke out its predictions for the various markets as follows:
- Residential Construction — Growth is expected to taper off to 12% in 2014.
- Commercial Construction — The current forecast calls for a 5% increase in 2014.
- Healthcare — Although the healthcare construction forecast slipped 1% since last year, it is still expected to grow 6% in 2014 to $44 billion.
- Educational — Due to budget cuts for government spending at all levels, the national market will rise only slightly in 2014 to 4% over 2013 levels.
- Manufacturing — Manufacturing construction is expected to drop 2% by year-end 2013 before returning to 4% growth in 2014.
- Highway and Street — Passage of MAP-21 calls for nearly $38 billion for the fiscal year 2014 for the Federal-Aid Highway Program. This is a major contributor to the CPIP predications of nearly $80 billion for 2014.