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ABC says 2019 will be a strong year for the construction sector

In a 2019 economic outlook recently published in Construction Executive magazine, Associated Builders and Contractors (ABC) Chief Economist Anirban Basu predicts 2019 will be another strong year for construction sector performance but warns of inflationary pressures, according to www.abc.org.

Job growth, high backlog and healthy infrastructure investment are a good sign for the industry. However, historically low unemployment has led to a construction industry labor shortage of about 500,000 positions, which is resulting in increased compensation costs.

"U.S. economic performance has been brilliant of late," Basu says. "Sure, there has been a considerable volume of negativity regarding the propriety of tariffs, shifting immigration policy, etc., but the headline statistics make it clear that domestic economic performance is solid. Nowhere is this more evident than the U.S. labor market. As of July, there were a record-setting 6.94 million job openings in the United States, and construction unemployment reached a low of 3.6 percent in October."

Basu says although the U.S. economy is thriving, there are potential long-term effects of rising interest rates and materials prices on the U.S. construction market. In addition, the workforce shortage will continue to influence the market in 2019.

However, Basu emphasized a recession is unlikely in 2019, even with recent financial market volatility. The Conference Board's Leading Economic Index, which often signals an economic downturn, continues to tick higher, indicating current momentum will continue for at least two to three more quarters. In addition, ABC's Construction Backlog Indicator, which reflects the amount of work that will be performed by commercial and industrial contractors during the coming months, reported a record backlog of 9.9 months in the second quarter of 2018.

Although Basu is optimistic about 2019, he issued a warning: "Contractors should be aware that recessions often follow within two years of peak confidence. The average contractor is likely to be quite busy in 2019, but beyond that, the outlook is quite murky."


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