construction charts from national association of pipe fabricators annual meeting feb 2014

NAPF Annual Meeting

February 28, 2014

Outlook for the Economy and

Construction

Presented by: Bernard M. Markstein

Reed U.S. Chief Economist

3

4

5

6

Outlook for the Economy and Construction

7

The U.S. Economy

Outlook for the Economy and Construction

8

State of the U.S. Economy

Economy improving, but weather muddles the numbers.

What is really going on?

Employment growing, but should be faster

Inflation moderate (too low?)

The Fed has started to taper

Housing/residential construction a positive

Outlook for the Economy and Construction

9

Risks to the Economy

The Fed and interest rates

Significant cuts in government spending in the near term

Europe

European government debt default

The euro

Energy (oil) prices

Outlook for the Economy and Construction

10

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

303-Month Moving Average, Year-over-Year % Change

Reed Total Starts (3-Mo MA YoY)

Source: Reed Construction Data

Outlook for the Economy and Construction

11

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

02 03 04 05 06 07 08 09 10 11 12 13 14 15

Residential Nonresidential Building Heavy Construction

$ Billions

History

Source: History – U.S. Census Bureau; Forecast – Reed Construction Data

Forecast

Forecast: Construction to improve Construction Spending and its Components

Outlook for the Economy and Construction

12

Residential construction is

recovering, but from a low level

Single-family housing market is on the mend, but much

further to go before it is back to normal

Multifamily market has largely recovered, but still some

room for growth

Outlook for the Economy and Construction

13

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

2,500

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Thousands of Units, SAAR

Nation’s long-run (trend)

need for the next decade

Low Estimate

(1.4 million starts per year)

Nation’s long-run (trend)

need for the next decade

High Estimate

(1.8 million starts per year)

Total Housing Starts (3-Month Moving Average)

Source: U.S. Census Bureau

Outlook for the Economy and Construction

14

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Thousands of Units, SAAR

Nation’s long-run (trend)

need for the next decade

Low Estimate

(1.15 million starts per year)

Nation’s long-run (trend)

need for the next decade

High Estimate

(1.45 million starts per year)

Single-Family Housing Starts (3-Month Moving Average)

Source: U.S. Census Bureau

Outlook for the Economy and Construction

15

0

50

100

150

200

250

300

350

400

450

500

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Thousands of Units, SAAR

Nation’s long-run (trend)

need for the next decade

Low Estimate

(250,000 starts per year)

Nation’s long-run (trend)

need for the next decade

High Estimate

(350,000 starts per year)

Multifamily Housing Starts (3-Month Moving Average)

Source: U.S. Census Bureau

Outlook for the Economy and Construction

16

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14

Thousands of Units, SAAR

Nation’s long-run (trend)

need for the next decade

High Estimate

(350,000 starts per year)

Nation’s long-run (trend)

need for the next decade

Low Estimate

(250,000 starts per year)

Multifamily Housing Starts (3-Month Moving Average)

Source: U.S. Census -Bureau

Outlook for the Economy and Construction

17

-60

-50

-40

-30

-20

-10

0

10

20

30

40

503-Month Moving Average, Year-over-Year % Change

Reed Residential Starts (3-Mo MA YoY)

Source: Reed Construction Data

Outlook for the Economy and Construction

18

0

100

200

300

400

500

600

700

800

02 03 04 05 06 07 08 09 10 11 12 13 14 15

Improvements Single-family Multifamily

$ Billions

Residential Spending Components

Source: History – U.S. Census Bureau; Forecast – Reed Construction Data

History Forecast

Outlook for the Economy and Construction

19

0

50

100

150

200

250

300

350

400

450

Single-Family Multifamily Improvements

$ Billions

2006 to 2013 ’14 ’15

Residential Construction Spending

Source: History – U.S. Census Bureau; Forecast – Reed Construction Data

Outlook for the Economy and Construction

20

Nonresidential

Building

Construction

Outlook for the Economy and Construction

21

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

303-Month Moving Average, Year-over-Year % Change

Reed Nonresidential Starts (3-Mo MA YoY)

Source: Reed Construction Data

Outlook for the Economy and Construction

22

275 269 283

302

340

404

438

376

290 284

298 299 317

343

0

50

100

150

200

250

300

350

400

450

500

550

02 03 04 05 06 07 08 09 10 11 12 13 14 15

$ Billions

History

Source: History – U.S. Census Bureau; Forecast – Reed Construction Data

Forecast

Nonresidential Construction Spending

Outlook for the Economy and Construction

23

Heavy engineering

Outlook for the Economy and Construction

24

Reed Heavy Engineering Starts (3-Mo MA YoY)

Source: Reed Construction Data

-40

-30

-20

-10

0

10

20

30

40

50

603-Month Moving Average, Year-over-Year % Change

Outlook for the Economy and Construction

25

171 171 169

185

208

248

272 274 265

251

272 263

278

300

0

50

100

150

200

250

300

350

400

02 03 04 05 06 07 08 09 10 11 12 13 14 15

$ Billions

History

Source: History – U.S. Census Bureau; Forecast – Reed Construction Data

Forecast

Heavy Engineering Construction Spending

Outlook for the Economy and Construction

26

0

10

20

30

40

50

60

70

80

90

100

110

120

Transportation Communication Power

$ Billions

2006 to 2013 ’14 ’15

Heavy Engineering Construction Spending

Source: History – U.S. Census Bureau; Forecast – Reed Construction Data

Outlook for the Economy and Construction

27

0

10

20

30

40

50

60

70

80

90

100

Highway Water and Sewer Conservation

$ Billions

2006 to 2013 ’14 ’15

Heavy Engineering Construction Spending

Source: History – U.S. Census Bureau; Forecast – Reed Construction Data

Outlook for the Economy and Construction

28

Regional economic

performance

Outlook for the Economy and Construction

29 Source: Philadelphia Federal Reserve Bank

Outlook for the Economy and Construction

30 Source: Philadelphia Federal Reserve Bank

Outlook for the Economy and Construction

31

Connect with Reed Construction Data

Twitter twitter.com/Bmarkstein

Twitter twitter.com/ReedConstrData

Facebook www.facebook.com/Reed-Construction-Data

LinkedIn www.linkedin.com/company/reed-construction-data

web www.reedconstructiondata.com

Outlook for the Economy and Construction

32

Contact Information and Links

Bernard M. Markstein

Office: 301-588-5190

Mobile: 404-952-3381

b.markstein@reedbusiness.com

U.S. Forecast and Commentary: http://www.reedconstructiondata.com/market-

intelligence/articles/

Blog: http://www.reedconstructiondata.com/market-

intelligence/bernie-markstein/