According to Construction Dive, “The industry will continue to face labor shortages, high materials costs and other headwinds, but infrastructure will be a bright spot.” Top construction economists say much like in 2022, signals are mixed. In a recent article, they took a look at five key indicators and what they suggest for contractors in the year ahead.
Architecture billings’ positive streak ends – The ABI remained positive in 2022 until October, when it took a bcsharp downward turn. That could indicate that recession fears and inflation have finally started to manifest in the industry, and may translate to a drop in available construction work in the latter end of next year. But Associated Builders and Contractors Chief Economist Anirban Basu says “For many contractors, 2023 does not stand to be the problematic year, it’s more likely to be in 2024 or 2025 if in fact the economy enters recession in 2023.”
Construction backlog remains steady – ABC’s member survey results measure the number of months of construction backlog.The industry’s backlog has remained positive over the past year but dipped in June and July and declined again in October from the previous month. It’s nonetheless 0.7 months higher than the year-ago period. Ken Simonson, chief economist at Associated General Contractors of America, says, “I expect a big pickup in 2023 in infrastructure investment as money from the IIJA starts to be awarded and contractors get to work on those projects.
Material prices remain volatile – Inflation has plagued the industry and COVID-19 has continued to impact supply chains, causing materials prices to swing wildly. Simonson expects price hikes and shortages to ease for some products, and to remain volatile for others. Currently contractors are experiencing rising costs for cement and diesel.
Labor shortages continue – While labor shortages have plagued the construction industry for some time, economists are mildly optimistic the multiple-year-long federal investment may help workers view construction as a stable long-term career prospect and attract them to the industry. Simonson expects labor availability to remain the top challenge for most contractors, with high job opening rates and rising wages continuing into the new year.
Construction input costs rise – While inflation, high wages and other price increases cut into contractors’ bottom lines in 2022, these indicators are trending in a positive direction for contractor. Simonson says, “The coming year will probably bring selective reductions in materials costs and supply chain bottlenecks, but despite some easing for builders, construction input costs are likely to continue rising more than overall consumer prices.”
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