Economic Forecast For The Construction Industry 2023

Although we have been hearing a lot about the recession recently, the economists at the Associated General Contractors and Associated Builders and Contractors are of the opinion that The US economy will be able to avoid recession in 2023. According to the Dodge Data and Analytics chief economist, Richard Branch, there will be a few sectors that will feel recession whereas others would not. Contractors that are able to pivot to the sectors that experience growth will benefit from such a mixed economic forecast for 2023.

Ken Simonson, an AGC economist, also pointed out that the continually increasing employment opportunities, state funding, and the decline in inflation are all positive signs that the construction industry will not be facing a recession. Contractors are also confident with most of them looking to hire more employees in the next six months. Surveys indicate that Five out of 10 contractors are expecting their sales to increase, whereas, only two out of 10 contractors expect their sales to decrease.

The Down Markets

There are some markets that are experiencing certain challenges right now. These markets include residential construction, office construction, warehouse construction, retail construction, and manufacturing construction. There are a few different reasons that these markets are suffering at the moment. Simonson pointed out that residential construction is dealing with a severe problem due to the decline in housing starts, building permits, and home sales. Professionals at dodge predict that the single-family home market will bottom late in the first or second quarter of 2023. 

The construction of warehouses accounts for 16% of the market, however, earlier in the year Amazon announced that in order to adjust to the reduced demand it was halting or delaying the construction of warehouse facilities. While it was once the strongest segment of commercial construction, dodge reports that it is now overbuilt and set for a decline in 2023.  The growth of online shopping also continues to impact the demand for brick-and-mortar retail and it is nowhere near where it once was.

The Up Markets

Some sectors are experiencing growth despite the ongoing talks of recession. These markets include public works construction, power and utilities, and data center construction. Experts at dodge predict that public works construction will see an increase of around 18% in 2023 and the market will reach $225 billion. With the Infrastructure Investment and Jobs Act in play, public works construction will see growth unlike ever before. With the 1.2 trillion-dollar investment in infrastructure development projects construction machinery sales will also see an increase.

Dodge also predicts an 8% growth in the power and utility sector with the conversion of power and utilities to renewable sources in 2023. Globally the emphasis is now on green construction and people are making efforts to restructure the existing fuel markets with alternative and renewable energy. According to the dodge forecast, data center construction will continue to be in demand in 2023. With the increase in online shopping and employees working from home in recent years, this sector has been a bright spot for the construction industry lately.