11-8-21

Lots of construction data came out last week. Sept spending, Oct jobs and Dodge Outlook 2022 for new starts. There have been major revisions to new starts since the June and July starts reports. Since June data, starts increased over what had been forecast for 2021 in Residential +12%, Comm/Rtl +20%, Mnfg +41%, Educ +4%, Rec +38%, Enviro+6%. These increases to 2021 starts improve the spending forecast for 2022. Mnfg, Rec and Enviro starts for 2022 were all reduced slightly.

See Construction Economics in Pictures 11-5-21 for current forecast.

Nonresidential buildings starts increased in 2021 by more than the marked up equivalent of $40 billion in spending (over the life of the projects). About half of that increase in spending would occur in 2022. So this increase in the starts forecast really pushed up the forecast for 2022 spending. All sectors now are forecast higher spending in 2022, but the biggest change is in nonres bldgs. These two plots show nonres bldgs as it was forecast based on June data on Aug. 1, and again as of Sept spending/Outlook22 starts data released Nov. 3. The expectation now is for an upward turn in spending beginning in the 4th quarter 2021. Previous models all had poor 2020/2021 starts reflecting a bottom in nonres bldgs spending just about mid-2022. The spending increase leading into 2022 moves the spending bottom to a point much sooner in 4th quarter 2021.

Nonres bldgs spending prior to release of Dodge Outlook 2022

Nonres bldgs spending forecast as of 11-3-21 includes release of Dodge Outlook 2022

Forecast spending bottom was mid-2022, now is Q4 2021. Although total spending is now forecast to increase 2.5% in 2022, that is still less than inflation, so real construction volume in nonres bldgs is still down slightly for 2022. The forecast bottom for nonres bldgs inflation adjusted constant $ is still mid-2022.