Expect continued small gains into 2017

The economy and construction are both gaining slowly. After hopes of much higher growth for the second half of 2016, both measures are instead looking like more of the same slow growth. We have used “almost” free money for more than six years to stimulate growth. And it has worked – just not as much as anticipated.

The debate for economists and policymakers is: More of the same or something else? Because the “something else” involves structural reforms in public versus private stimulus and higher productivity gains, the United States will mainly stick with easy money with modest reforms. It is unlikely there is overwhelming support for a multiyear period of re-adjustments that will be painful for some.

For construction materials, it means continued small gains into early 2017 as prior increases in construction contracts continue to push material volumes higher. But we are running out of demand in the private sector.

High home prices and lack of down-payment funds are beginning to put a ceiling on new home sales. Modest employment gains and changing shopping habits (the Amazon effect) mean nonresidential vacancy rates will not decline enough to spur increases in nonresidential volumes for the next few years.

Solid gains in public finances are supporting higher infrastructure spending but are now in competition with higher pension and healthcare demands for public employees. On balance, infrastructure spending is near a plateau for the next few years. Both presidential candidates have pledged to support more infrastructure spending and, if they follow through, it will begin to help this segment after 2018.