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August 25, 2020

Dodge Data & Analytics Forecast: "Growth is Going to Move Sideways Through Mid-2021”

Dodge Data & Analytics Chief Economist Richard Branch has released an updated Economic and Construction Market forecast.

Branch projected that the nation’s gross domestic product (GDP) growth will drop 5.9 percent for 2020. He said the economy bottomed out in the second quarter when GDP growth declined 32.9 percent and will grow by 17 percent in the third quarter and 1.1 percent in the fourth quarter.

“Once we get past the third quarter,” Branch said, “growth is going to move sideways through mid-2021.”

Branch forecasts 1.5 percent GDP growth in 2021.   

“I think the foundation of the recovery is built,” he said. “As long as businesses are allowed to remain open, the economy should continue to move forward. With the infection rate picked back up, however, that’s a big ask and there’s a potential for cracks to develop in the foundation.

“The economy won’t fully recover until people feel safe to go out,” he added, “and that’s not going to happen until there’s a vaccine and that vaccine is widely available.”

Looking at the construction industry, Branch said “there are enough projects in the pipeline to keep the construction sector moving forward,” but added that most market sectors will struggle over months.

In his forecast, Branch only projects annual growth in two construction sectors in 2020; warehouse starts will climb 2 percent and highways and bridges starts will rise 2 percent

Commercial construction starts will fall 21 percent in 2020 and then climb 6 percent in 2021. “We won’t get back to the 2019 peak until well into 2023,” Branch said.

Within the Commercial sector:

  • Retail starts—Down 34 percent in 2020; up 10 percent in 2021
  • Office starts—Down 16 percent in 2020; up 7 percent in 2021
  • Hotel starts—Down 42 percent in 2020; down 4 percent in 2021
  • Warehouse starts--Up 2 percent in 2020; up 8 percent in 2021

Manufacturing building starts will fall 42 percent in 2020 before rising 2 percent in 2021. “We have a long way to go before the manufacturing sector gets back to where it was at the beginning of the year,” he said.

In the Institutional sector, which is primarily public construction, Branch forecasts a 14 percent decline in 2020 and a 2 percent increase in 2021.

“We’re starting to see fissures on the public side of the market as state and local areas grapple with declining revenues at the same time that COVID-associated costs are on the rise,” Branch said. “Analysis that Moody’s Analytics did two or three weeks ago suggests that without federal assistance, state and local areas would need to cut a combined $500 billion from their budgets for this fiscal year, which for most states began on July 1, as well as for the next fiscal year, which could have dire impacts on the public building and infrastructure sectors.”

Within the Public sector:

  • Education starts—Down 8 percent in 2020; down 2 percent in 2021
  • Healthcare starts—Down 4 percent in 2020; up 9 percent in 2021
  • Public Buildings starts—Down 23 percent in 2020; flat in 2021
  • Transportation Buildings starts—Down 14 percent in 2020; up 15 percent in 2021

The Non-Building sector includes infrastructure and power. Branch forecasts a 15 percent decline in activity this year and a 10 percent jump in 2021.

Within the Non-Building sector:

  • Highways and Bridges starts—Up 2 percent in 2020; up 6 percent in 2021
  • Power and Gas Plants starts—Down 42 percent in 2020; up 40 percent in 2021
  • Environmental starts—Down 12 percent in 2020; up 5 percent in 2021

Click here to watch the forecast presentation.

 

 

 


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