The construction industry saw declining demand during 2020 due to the COVID-19 pandemic. While there is optimism that the economy will fully recover as more COVID-19 vaccines are administered, the construction industry continues to experience uneven demand and a variety of obstacles, such as high material prices and labor shortages.
Recent Industry Performance
According to Dodge Data & Analytics (“Dodge Data”), total construction starts decreased 10.0% during 2020 to $766.3 billion. As 2021 began, Richard Branch, chief economist for Dodge Data, noted that construction starts were likely to see a “long and rocky road ahead.” Branch indicated that, while high vaccination rates were giving hope for a strong economic recovery, the construction industry had become plagued with logistical problems and a rapid escalation in the prices of materials. As a result, during the first six months of 2021 (latest available), Dodge Data reports that total construction starts saw the following pattern: down 4.0% in January; down 2.0% in February; up 2.0% in March; down 2.0% in April; down 1.0% in May; and down 7.0% in June. Overall, the seasonally-adjusted annual rate for construction starts in June 2021 totaled $863.6 billion.
At the same time, Dodge Data reports that, despite some volatility month-to-month, when compared to the first six months of 2020, construction starts were up 15.0% in the first half of 2021, reaching $436.0 billion.
Meanwhile, according to a July 2021 (latest available) statement from Anirban Basu, chief economist for Associated Builders and Contractors (“ABC”), the construction industry “is coming back with a vengeance.” Basu notes that, even though the COVID-19 pandemic continues and is, in fact, surging in many parts of the U.S., the construction industry “is on the path to normalcy.”
Looking ahead, Dodge Data’s Branch anticipates an “uneven” recovery through the second half of 2021 due to rising material prices and labor shortages. However, Branch sees “pent-up spending in the second half of the year as the ‘horse leaves the barn’ and starts running.” Overall, Dodge Data anticipates 4.0% growth for total construction starts in 2021 and an 8.0% increase in 2022.
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