FMI’s Construction Outlook for Q2 | Resilience Amidst Uncertainty
Published on by Erik Wurtenberger in Construction
Leading consulting and investment banking firm for contractors, FMI, has released their second quarter of 2023 edition of the North American Engineering and Construction Outlook. The thirty-page report is available in full at FMI’s website, but some key takeaways from the report include:
- Engineering and construction total spending is forecast to be down 1% in 2023, compared to up 11% in 2022.
- The decline in overall spending is forecast due to steep declines expected in the residential space, while nonresidential construction is forecast to experience growth through the remainder of 2023.
- Investment growth is expected in the lodging, commercial, transportation, manufacturing, highway and street, water supply, and conservation and development sectors. Each have an expected year over year growth of greater than 10%.
- Corrections are expected in the residential spending due to the softening of the economic and interest rate hikes. This is expected to continue into 2026. Similar corrections are expected to bleed over into the nonresidential space beginning late 2023 and into 2024.
Going into more detail, the following sections are expected to be up 5% or more in the second quarter of 2023 compared to 2022:
- Multifamily, lodging, commercial, office, healthcare, amusement and recreation, transportation, manufacturing, highway and street, sewage and waste disposal, water supply, and conservation and development.
The following sectors are expected to see stable performance when compared to the second quarter of 2023 to 2022 (0-4% growth):
- Educational, religious, public safety, communications, and power.
The following sectors are expected to see a decline in the second quarter of 2023 compared to 2022:
- Single-Family and Improvements.
Looking at the residential market decline in more detail, single-family residential is expected to be down 16% comparing the second quarter of 2023 to 2022. New home sales are down nearly 20% year over year, builders are sacrificing margins in an attempt to keep volumes up, and interest rates are beginning to stabilize which could help pricing.
The decline in single-family residential construction has led to an increase in the multifamily market. A wave of approximately 960,000 multifamily units are expected to come available in the next few quarters.
Interpreting the trends
While the macroeconomic environment outside of the construction industry continues to be fluid, there are opportunities for contractors. Knowing where to position your company in the market can be crucial to success.
If you’d like to talk about how these trends may impact your construction business, or want to find a better, more efficient process or improve your bottom-line business results, contact us for a free consultation with one of our top construction industry pros. As always, we’re here to help.