Aggregate outlook declines beyond 2017

Construction markets remain healthy along with a growing economy. Near term, the prospect of 3-plus percent GDP growth looks good; longer term they look worse. The enthusiasm for major tax cuts (reforms) seems to be evaporating in the U.S. Senate and that will make strong economic growth less likely for 2018 to 2020.

But aggregate still has positive upside potential owing to the improvements in housing starts and higher public support for infrastructure spending. This is especially true at the state and local level.

Our outlook beyond 2017 shows a modest decline as housing and nonresidential fall in 2018 and 2019. The small decline is based on higher interest rates, higher home prices, lack of down payment funds, the retail freeze and less square feet of commercial required per worker.

Combined they run counter to the high level of current construction contracts. Nonbuilding will continue to improve due to steady support at the federal level and increasing support at the local level. The positive impact of a southern border wall is declining as its scope is reduced and the positive impact of a trillion-dollar infrastructure program is stretched out and reduced.

Regionally, the South and West are returning as the major drivers of growth. The rest of the country is hot or cold on a county-by-county basis. Over the next two years there are no large areas that will do poorly. Even the energy areas are recovering and will do somewhat better as long as oil stays above $40 per barrel.