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THE DOWNSIDE and THE UPSIDE
by Tim Farrell
You don't have to look far to realize our economy is not out of the woods yet. Abroad, there is Greece's liquidity crisis with worldwide-reaching consequences. At home, Federal Reserve Chairman Bernanke revises already modest economic and unemployment forecasts. Energy costs remain high and drive the cost of every commodity higher. The housing sector remains flat as supply is flooded by more and more foreclosures. These factors all contribute to a stalled U.S. economic recovery. This in turn further strains Federal, State, and Municipal spending. What does all this mean for us in the construction industry?In 2010, Federal stimulus spending helped to cover the hole we now appear to be in. Shovel-ready projects and major infrastructure projects were given the green light and those projects created a lot of activity. Here we are in 2011 with shovel- ready stimulus projects completed and further cutbacks in Federal, State, and Municipal spending, yet there appears to be no growth in the public sector over last year's already decimated activity levels. A few bright spots remain with a slight uptick in educational facilities, modest improvement in multifamily housing and major investment in transportation infrastructure. Overall, construction industry growth has flatlined the first half of 2012 with a forecast for minimal growth.
THE UPSIDE
Everyone likes the bad news first, so take a deep breath and remember the sun will shine tomorrow. It's not all bad. Interest rates remain near zero at historically low rates. As the backlog in existing homes bottoms out, renters are expected to begin buying homes, easing the backlog. Just today, a coordinated worldwide release of oil reserves should increase supply, driving down energy costs. |
