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Dodge Construction Network projects moderate 2022 growth

By |  November 12, 2021

Dodge Construction Network logo

During Dodge Construction Network’s (DCN) 83rd annual Construction Industry Outlook event, several speakers, including DCN CEO Dan McCarthy, provided 2022 projections for different aspects of the construction industry.

In his opening remarks, McCarthy acknowledged that 2022 won’t be viewed as “construction after COVID” but rather “construction and the impact of COVID.”

Richard Branch, DCN’s chief economist, says the dollar value of construction will increase by 6 percent in 2022.

He also emphasizes that while residential construction will continue to play a large role in next year’s growth, a more balanced recovery in the nonresidential sector will also begin. This is due, in part, to the recent passage of the Infrastructure Investment & Jobs Act.

Branch adds that the total nonbuilding value forecast of 32.5 percent year-over-year growth from 2021 to 2026 would have been 14.9 percent had the bill not passed.

Headshot: Richard Branch

Branch

Construction challenges

Additionally, Branch says there are three main challenges that will impact the construction sector over the next year. Those are price, people and productivity.

“All those projects sitting in planning are taking longer to get through, and while construction starts will grow in 2022, that growth is expected to be modest,” he says. “It’s very clear, as we put all of this together, that if not for the challenges, shortages and prices that we’re currently facing, construction activity would be much stronger than it currently is.”

Chris deRitis, deputy chief economist at Moody’s Analytics, says there are currently 10.4 million job openings, as of August 2021. He adds that nearly 7.7 million people are unemployed – not working or actively seeking work.

However, deRitis suggests this may not be a sizable problem for too much longer.

“By the end of next year, we expect that the economy will have recovered all of the jobs we lost during the pandemic,” deRitis says. “As well as jobs that we should have been creating, just due to population growth as people graduated from high school and graduated college. So, by the end of 2022, our baseline forecast calls us to be back at full employment. Basically, anyone who wants a job can get a job.”

While that projection is welcome news to the construction industry and the country’s economy as a whole, Branch fears that increased material costs may continue through next year.

“From an operating perspective, plants are very slowly getting back to normal,” he says. “But we’re still dealing with trucking issues; we’re dealing with port issues. So I think the inflation we’re dealing with here in the construction sector, as it relates to materials and prices, is probably going to last into mid-next year before we start to see prices pull back.”

Adds Branch: “Even as those prices start to pull back or the inflation slows in the back half of 2022, that level of prices should remain fairly high, at least through the end of next year.”

Economic factors hindering productivity

The combination of these two problems leads into what Branch says could be the most important problem to tackle in 2022: productivity.

“In a world where prices are rising, materials are hard to come by and labor is scarce, the ability to do more with less is what’s going to be a critical path forward in terms of increasing your profit margins,” Branch says.

Branch adds that productivity improvements are not as easy to come by as some may think.

“Productivity enhancements are not just always about on-the-job changes,” Branch says. “Many companies have made great strides, in terms of collecting and utilizing data within their own activities. So far, though, comparatively few of those have been able to bridge, or make that full potential, between their own internal data services and data provided by third parties or vendors or private data sources.”

Jack Kopanski

About the Author:

Jack Kopanski is the Managing Editor for Pit & Quarry and Portable Plants. Kopanski can be reached at 216-706-3756 or jkopanski@northcoastmedia.net.

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