Construction Firms See Expansion in the First Half of 2019
2019 began with expansion for the construction industry, a recent Associated Builders and Contractors, Inc. (ABC) study reports. According to ABC, nonresidential spending totaled $762.5 billion for January 2019, which represents an increase of 4.8 percent over January 2018.
Similarly, FMI’s recent first quarter 2019 report indicated the engineering and construction spending for the United States is forecast to increase three percent in 2019, compared to four percent in 2018. They expect growth to be led by public investment. Industry segments that are forecast to be top performers in 2019 by FMI include transportation, public safety, education, and manufacturing, while multifamily housing, lodging, and religious segments are expected to be down in 2019.
Some leading indicators are also trending positively while others are not. FMI’s Nonresidential Construction Index is again over 50 for first quarter 2019, and has increased into the second quarter 2019, an indication that industry conditions are improving and expanding.
ABC’s Construction Backlog Indicator increased to 8.8 months in February 2019, up from 8.1 months in January 2019. “As predicted, the decreased backlog in the first month of the year reversed in February,” said ABC’s chief economist, Anirban Basu. He indicated that infrastructure took a hit in January 2019, consistent with the thought that the government shutdown may have played a role.
The Construction Backlog Indicator increased from January to February for the commercial and institutional segment and the infrastructure segment, but decreased for heavy industrial. The middle states was the only region in the United States with a decrease in the indicator, as the northeast, south, and west all increased. “In general, nonresidential construction activity lags the overall economy by 12 to 18 months,” said Basu. “Last year was good for the economy, with the implication that contractors should expect to remain busy in 2019.”
Growth opportunities for construction companies will continue into the second half of 2019. Whatever the method your firm chooses, it’s clear that management needs to stay focused to capitalize on favorable market conditions. If you have questions about how your can grow your construction practice, or need assistance with a construction tax, audit or accounting issue, Barnes Dennig can help! For additional information call us at 317-572-1130 or click here to contact us. We look forward to speaking with you soon.