Mid-year Economic Outlook

By Cass Jacoby, RCS Reporter.  

What to expect for the latter half of 2021 and what the aftermath of the 2020 pandemic has taught us so far. 

2020 brought the construction industry bans, lockdowns, work –from-home orders and budget constraints. However, out of the decline in activity, uncertainty in the market and general crisis comes the period of recovery. In its second half, 2021 promises more economic growth as more and more Americans get vaccinated and the federal stimulus continues. However, the construction sector faces some unique challenges.  

Dodge Data and Analytics, North America’s leading provider of data and analytics for the construction industry, hosted a Mid-Year Outlook May 2021 Webinar. With the use of proprietary data, econometric modeling and experienced insights they report a highly studied national outlook for the construction industry. Read on for a briefing of what to expect for the last half of the year. 

Economic outlook 

• The combination of federal stimulus and growing vaccinated Americans promotes economic growth.  

• This surge will continue in 2022 as more spending and investing takes place.  

• High material prices and labor shortages will continue, making the recovery process longer.  

Undeniably, the pandemic has had a significant effect on the economy. Experts are optimistic that the more vaccinations that happen, the more likely we will see a robust recovery. Construction, however, is expected to underperform. Significant supply chain problems across the U.S. are still struggling with the unprecedented uptick in demand, thus skyrocketing prices.  

Dodge Data and Analytics predicts that these higher prices are likely to stay for the rest of 2021. Further, the most significant downside risk to the construction sector is the risk of projects getting delayed and cancelled.  

Residential buildings 

Throughout the pandemic, the single-family residential market dramatically increased. The pandemic caused an exodus of people out of urban areas and into the suburbs, fueled by the ability to work from home. It is the same single-family sector however that is feeling the brunt of higher lumber prices and the shortage of skilled labor. Furthermore, the lack of homes for sale has pushed prices higher hurting affordability. Expect multifamily activity to fall this year as construction remains soft in large metro areas. 

Commercial construction 

Commercial construction recovery is uneven this year, while Dodge Data predicts that more projects will ramp up for warehouses, data centers and renovations, retail and hotel construction remain subdued and most likely delayed. Dodge Data and Analytics reports that warehouse starts will continue to break records as builders like Amazon, Seefried and Northpoint build massive distribution centers across the country.  

Manufacturing  

The manufacturing sector is just entering the stages of recovery. Output is rising as the economy recovers, with material shortages and rising prices can be a large incentive to build more manufacturing capacity but a shortage of skilled labor hampers a quick recovery. 

Institutional construction  

Expect a slower recovery for institutional building construction. While healthcare will be undoubtedly a bright spot for the sector, publicly funded buildings look sluggish as state and local budgets have been worn down through the pandemic and with the recession expect fewer education building projects to start 

Nonbuilding construction 

Environmental public works and electric power are expected to be strong areas for nonbuilding construction in 2021. Dodge Data and Analytics says that over the long-term the outlook for infrastructure construction is very positive as hopes rise for an infrastructure agreement in Congress, but in the meantime growth is slow. 

Conclusion  

While no one can tell the future, Dodge Data & Analytics’ forecast remains hopeful that step by step the industry will recover strong. 

Stay up to date with the latest roofing industry news when you sign up for the RCS Week in Roofing e-news.