Solid growth, pricing gains to continue

This economic and construction expansion continues along a record path.

The obstacles are increasing but not enough to derail growth yet. Moderate GDP growth in the 2 to 3 percent range is likely over the next two years along with a continued unemployment rate under 4 percent.

With job openings still widespread, consumers remain in great shape. Trade problems are beginning to hinder growth and slow manufacturing somewhat. The game of chicken with China will probably continue for years with progress being very bumpy.

For construction, the private segments (residential, nonresidential) remain at a plateau with little upward movement for the next few years. Even though the economy is strong, home prices have increased beyond most millennials’ ability to purchase, and many don’t want to own homes anyway.

Nonresidential is still in the midst of structural changes that are changing the relationship between employment growth and nonresidential growth. Telecommunication advances mean fewer square feet needed per worker, and the continuing move to online shopping is holding back any recovery in retail investment. Warehouses seem to be the only thing growing.

As we have said during the past year, nonbuilding is the strong horse and will remain so for a few more years. Most of the strength in highways and bridges will come from local and state funds. All of this leads to aggregate consumption gains in the 2-plus percent range for a few more years.

The default outlook is for continued growth in aggregates demand and solid gains in pricing.

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Dr. David Chereb has many years of experience forecasting construction materials, and his web-based forecasting models have captured every major turning point in materials demand for more than 15 years. Chereb received his Ph.D. in economics from the University of Southern California.