Construction Bog is Real, But Not Forever

The construction slowdown is not eternal… unless government policies make it so.

Mon May 12, 2014 - National Edition
Construction Equipment Guide

For more than a decade, Ken Simonson has been analyzing construction industry statistics for Associated General Contractors. Economically speaking, he has witnessed ups and downs, peaks and valleys, and, for several years now, a bog.

The AGC chief economist’s look at 2014 identifies trends that are supporting industry growth or are impairing it. They are revealing.

Simonson cites three positive trends—shale oil drilling, residential construction (a shaky trend) and… Panama Canal expansion. Not many people on the street would cite widening of the canal as a major contributor to construction industry health in the U.S. But Simonson charts 16 Pacific, Atlantic, and Gulf ports in the U.S. that are busier because of canal work.

It is another example of global economics. The same phenomenon drives U.S. construction equipment manufacturers who benefit from major earthmoving or mining projects at faraway places on the globe. Of course, the U.S. benefits even more when major construction occurs at home—such as, say, in building of an oil pipeline across several states.

The economist also tallies three negative trends. One is that debt-burdened state and federal governments are spending less on schools and infrastructure. That is not apt to change much till budget reform happens.

A second negative factor is consumers increasingly buying online instead of at a store. Such shopping is a transitional problem. When store-building decreases, warehouse-building ultimately will increase to handle all that online merchandise.

Simonson’s third negative is employers offering employees smaller offices and, thus, building smaller office buildings. Flush times probably will reverse that trend. In fact, a future resurgent economy will alter everything—bringing new stores and offices (with maybe a different mix of products and employees), more tax revenue for infrastructure spending (more prudently spent, one hopes), and new homes (more soundly financed).

This bog is not eternal… unless government policies make it so.

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