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Through Q1 of ‘21, the construction industry is on pace to earn $1.51T in revenue, which is up 5% from Q1 of ’20.
Residential construction, the largest of the 17 construction sectors by a factor of ~7, continues to fuel industry growth and is up by 23%.
Note that the US Census Bureau has maintained detailed industry data since 2003 and since then, the largest annual jump in residential spending was 22%, which occurred in ’12.
Non-residential spending continues to lag and is down 7%, mainly due to sharp reductions in hospitality, commercial, education, highway & street, and manufacturing sectors.
Private spending is up 9% (due to residential) and public spending is down 5%. If this -5% figure holds it will be the worst year for public construction by a factor of ~2 since data collection started in ‘03.
Residential construction will likely cool in the coming months as inflation has hit this sector hard, with lumber costs jumping over 70% YTD and the overall PPI for Construction Materials increasing by ~20% over the past year.
Keep in mind that inflationary pressures are often a leading indicator of construction defaults and construction disputes.
The timing of this inflationary surge is unusual as it typically manifests in the latter stage of expansion cycles.
Economic Analysis – January 21, 2021
This three-part presentation covers the state of the US economy, US construction industry, and US contract surety industry. Based on Bill’s analysis, 2021 will be a difficult year for the US construction industry, which is often the case in the tail end of a recession and the year that follows a recession, when backlogs shrink, and poor decisions are made as contractors fight for survival.
As a successful strategist and expert in construction and business, Bill routinely speaks at industry events and for company leadership teams. If you are interested in scheduling a live webinar presentation, please contact us.
VERTEX is an industry leader in the surety claims marketplace. We have successfully worked on many of the largest and most complex surety claim assignments throughout the globe.
Bill McConnell is a co-founder and Chairman of The Vertex Companies, LLC. Bill is a top expert witness for construction disputes as he has testified nearly 250 times, most notably for quantum/damages, scheduling, allocation, termination, and standard of care opinions. As the Chairman of VERTEX, Bill sets the strategy for VERTEX’s future.
