Basu: Economic uncertainty to continue into 2023

Basu looks at the housing market, which came into the year hot and is now in recession, as an example of how quickly things can change because of interest rates.

“The U.S. housing sector is already in recession, even though mortgage rates are still pretty low by historic standards,” he says. “They’re higher than they were in January this year. Things can change very quickly, and it just tells us about the central importance of interest rates.”

Sector specifics

The recession in single-family housing is only part of what Basu calls a “tale of many segments” when examining construction as a whole. While rising interest rates are hurting the single-family segment, they are, in turn, helping multifamily housing.

“If people can’t afford a home, they end up renting for lengthy periods,” Basu says. “Multifamily construction, particularly apartment construction, will be one of the strongest segments of construction – even if we enter a recession in 2023.”

Basu also expects public construction spending to grow. He says while now is an awkward time to build due to the expenses involved, the next two years of public construction should be strong.

In nonresidential construction, manufacturing is leading spending growth among all 16 nonresidential segments. This is due, in part, to U.S. CEOs bringing more of their supply chain back home.

“They want to protect intellectual property and, as a result, this reshoring episode is real,” Basu says. “Plus, there have been some paths made out of Washington, D.C., including policies related to semiconductor computer chip manufacturing that, I think, is supporting more production here. That translates into more construction.”

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