During CE’s “2024 Q3 Construction Economic Update and Forecast,” Anirban Basu admitted there are reasons to be optimistic about the construction industry as 2024 enters its final quarter, but left viewers with his steadfast grain of salt: a recession is coming in 2025. Review the results of the audience polls, how they compare to last quarter’s results, Basu’s top takeaways, the full webinar recording and more below:
Q3 VS. Q2 POLL RESULTS
Which of these is the leading challenge for your company today? (Parentheses indicate variation from July poll results)
- Supply chain and/or materials issues
6% (same) - Skills/worker shortage
59% (+2 points) - Insufficient demand for construction services
15% (same) - Availability of financing for projects/project work
14% (-1 point) - None of the above
5% (-2 points)
Over the last three months, how has your company’s backlog fared?
- It has risen considerably
16% (+2 points) - It has risen slightly
27% (+1 point) - It has remained about the same
28% (-4 points) - It has declined slightly
23% (+4 points) - It has declined considerably
6% (-3 points)
Where do you expect your company’s profit margins to be a year from now?
- Substantially higher
3% (-1 point) - Slightly higher
34% (+12 points) - About the same
35% (-7 points) - Slightly lower
24% (-5 points) - Substantially lower
3% (same)
BASU’S TOP QUOTES AND TAKEAWAYS
4:00—I have been so surprised that the economy performed this well.
6:15—You’ve probably heard that the manufacturing sector has been stumbling recently, by some measure it’s in recession. Much of the growth in consumer outlets has been on services, things like travel.
8:32—Nonresidential fixed investment includes nonresidential construction, that added 0.53 percentage points to gross domestic product [in Q2 2024]…. That could be things like investment in data centers, investment in manufacturing plants…. Where we are really seeing some weakness recently is in multifamily (-0.11 points)…part of the reason for that is multifamily buildings are selling for a price that is less than the previous purchase price.
10:25—The last time America lost jobs was in December of 2020. I think the winning streak ends this month. This [week] is the reference week for the October jobs report. With all these people evacuating from various Florida markets and they’re not on the job this week , you might very well see a negative number for the October jobs report.
11:06—The September jobs report was a blockbuster. With so many Americans living paycheck to paycheck, this economy depends upon the strength of this labor market because if you don’t have that, the consumer can’t continue to spend, and 70% of aggregate demand is the consumer. So, this is the fuel and the fuel is still there: 254,000 jobs were added in September.
29:21—[Fewer] than one in three [of construction workers polled] are saying there is a demand-side issue. By contrast, three in five are saying [their leading challenge is] skills and worker shortage. What that tells us is, it’s an industry that’s still busy and it’s an industry that must have a positive outlook because if it has remained busy during a period of higher interest rates, higher borrowing costs—and now the federal reserve is reducing interest rates—all things being equal, it should be a very good outlook. If we managed to deal as an industry with the higher interest rates, surely we can navigate the lower interest rates to come. There is reason for optimism here and by and large the industry is pretty optimistic in terms of demand for their services.
56:13—Some categories continue to power the way, the supply chain’s coming back home, the CHIPS and Science act, Inflation Reduction Act, all these massive subsidies to manufacturers making locational decisions to put their next production facility or fabrication plant here in America…and that’s not going to end, even though the federal subsidies might end at some point, there are so many reasons to put production in America.
1:04:29—I have always believed that at some point, these higher interest rates we’ve been living with will press down on economic activity—again, monetary policy operates with long and variable lags—and so I think [a recession] is still coming and it’ll catch some people by surprise.
During the Q&A session, Basu remarked on the ILA strike and what will happen if further agreement is not reached by mid-January, how the effects of Hurricanes Helene and Milton will ripple from the Gulf coast across the country, how the volatility and anticipation of the upcoming election is influencing construction, how the Baltimore Ravens are bouncing back and more.
Watch the recording for full details, opinions and predictions.
