All Signs and Numbers Point to a Huge Year for the Construction Industry; Construction Spending is on the Rise, and the Demand for Workers is Strong
Construction spending rose in the US by 0.7 percent, month-on-month to an all-time high of $1.25 trillion in December 2017, per Trading Economics. This followed a 0.6 percent increase in November.
In 2018, it is expected that Real Gross Domestic Product (GDP) growth will be 2.1%, unemployment rate will further improve to 4.6%, and inflation will be 2.3% in the United States.
The US construction forecast shows growth of almost 5% in 2018. Single-family homes will experience the most growth at 9% and Multi-family will start its decline with a 1% drop. Education and Public Buildings will both grow 6%. Roads and Bridges end-market are forecast to grow 6%. Geographically, growth will be greatest in the South and West with Texas forecasting the strongest growth at 10%. The growth in the South is partially due to hurricane damage repair. Hawaii leads the states in predicted 2018 construction forecast, with Kansas, Kentucky, West Virginia, Nevada, New Mexico, Mississippi and Wyoming coming in with double digit growth.
Overall constructions costs are expected to increase 3% in 2017 and to increase another 2-3% in 2018, led by 3-4% higher construction labor costs. Material costs are forecasted to increase 2-3% in 2018. Gypsum products are expected to experience the largest price increase (6-7%) in 2018, followed by Cement, Aggregates, Concrete, and Lumber all in 3-4% range. Crude oil is another important construction price index to review with it increasing 12% in 2017.
Single-family home builders struggle to find land for building. In turn, land prices are rising, limiting the building of entry-level houses that are affordable. Still, close to 1 million new residential single-family homes will be built this year.
Overall construction costs are forecast to increase by 2-3% in 2018, primarily led by labor costs. Labor shortages are still challenging due to lack of skilled labor and inability to recruit millennials into the job.
The construction industry may even do better than predicted due to Trump’s Infrastructure Investment of $1.5 trillion, targeting roads, bridges and other infrastructure projects.
With more business coming to the construction industry, Producers, Haulers, Suppliers and Contractors in Heavy Building Materials need to be prepared for the increase in activity. Automation of processes and a collaborative network connecting all trading partners, allowing them to more easily conduct business with each other, is a requirement for success.
Command Alkon is honored to be your vendor of choice for all your Heavy Material Construction software needs. Please contact us to talk about the value our solutions can add to your operations.