ENR has released their 2023 market forecast:
2023 Economic Forecast: Markets Are Mixed for Year Ahead
Inflation, rising interest rates and a possible global recession continue to top the list of forecasters’ concerns for the coming year.
“The key issue facing the economy now is inflation, [which is] determining its path as we move forward,” says Richard Branch, chief economist at Dodge Construction Network. While he says the Federal Reserve was “a little late to the party,” a reference that it kept interest rates too low despite signs of post-COVID-19 economic recovery, the central bank now is aggressively raising them to reign in further inflation impacts. Should this be successful, Dodge expects rates to steady in the first quarter. “That should allow the economy to stabilize and start to recover in the back half of 2023,” Branch says. His forecast expects the U.S. to avoid a “technical” recession, but in many construction sectors, “it is going to feel recessionary,” he says.
Dodge expects construction starts to reach $1.086 billion by year end, and stay roughly flat in 2023— falling just 0.2% to $1.083 billion. FMI, which forecasts put-in-place construction, estimates a 7.8% total construction hike in 2022, with a 1.3% decline in 2023. “I don’t think this is another great recession,” says Bowman. “I’ll take flat over down any day of the week.”
Manufacturing Leads Non-Residential
But somewhat more favorable trends are seen for non-residential construction, with starts expected to end 2022 up 40.2%, according to Dodge, before dropping 10% next year. The star of this sector is manufacturing—up a whopping 196% in 2022—due to facilities that were once overseas being brought back to the U.S., and new federal development boosts.
The 2022 CHIPS and Science Act, which provides $52.7 billion for semiconductor research and development, manufacturing and workforce expansion, “was a major step toward reinvigorating domestic chip production and innovation for years to come,” John Neuffer, president of the Semiconductor Industry Association, said in a press release following its enactment. “Semiconductor R&D is essential to innovations powering America’s economy, national security, advanced manufacturing and critical supply chains.”
Additionally, the just enacted Inflation Reduction Act, which will allocate $369 billion in funds and tax incentives for green manufacturing and clean energy, will play a large part in the sector increase. While 2023 will see a decline of 42.7% from this year’s peak, according to Dodge, manufacturing sector construction will still be at a “historically high” level of activity, says Branch.
Click here to read the full article on ENR.com, including forecasts for the residential, transportation, power, and institutional sectors.