The next two years will bring a mixed economic bag for the construction industry, which should show signs of growth by late this year, economists said Thursday.
“I think there’s a fairly high level of confidence we’re going to see an upturn in construction over the next year or so,” said Kermit Baker, chief economist for the Washington-based American Institute of Architects.
Baker offered economic outlook analysis Thursday during an industry conference call hosted by Georgia-based Reed Construction Data.
While the construction industry as a whole remains in bad shape, Baker said, with more than 20 percent unemployment nationwide, some sectors will turn faster than others.
Milwaukee, for instance, is poised to become one of the top markets in the country for remodeling and improvement projects, Baker said. While that doesn’t offer visions of big-money projects, Baker said remodeling is a $300 billion industry.
State spending, though, as indicated in the budget Gov. Scott Walker released Tuesday, brings more bad news for the industry, because all levels of government will have less money to work with.
“With the revolt against spending in Madison and Columbus, Ohio, there’s a risk that funding from public construction is going to be a good deal less than one would have thought last fall,” said Jim Haughey, the chief economist for Reed Construction Data.
Even at the federal level, where President Barack Obama and Congress have passed stimulus bills that aided construction, lawmakers appear to be shutting off the spigot, Haughey said.
“The Obama aggressive spending appears to be halted by the recent election,” Haughey said. “A few months ago, we were thinking about what additional money to spend. Now, Congress is talking about (how much) we should reduce spending by.
“Steep budget cuts are coming in state and municipal budgets. This has been going on at a slower pace over the last several years, but it’s going to be much more serious in 2011 than 2010.”
The commercial market, though, which has struggled, should rebound enough to begin making up for cuts in public spending, Haughey said.
“We anticipate the commercial situation to do better, and the institutional markets will suffer as public funds are cut,” he said.
In many areas, he added, “you can see substantial increases in new business from a year ago.”
The continued unrest in Middle Eastern countries could lead to material price increases, Haughey said, which is concerning.
“Revolutions are raising commodity prices over what they would have been at this time,” he said.
Perhaps the most promising sector for the construction industry during the next two years will be power-related projects such as power plants and wind farms, said Ken Simonson, chief economist for Associated General Contractors of America.
“The best news has been power construction,” he said. “It was already at a pretty high level in 2010 with the possibility we will get approvals for nuclear power plants that would considerably add to spending totals.”