The construction industry experienced both highs and lows throughout 2021. While construction starts increased as firms worked on a strong backlog that resulted from COVID19-related work stoppages in 2020, many obstacles also arose, including supply chain snarls, skyrocketing material costs and a challenging labor market. These obstacles will likely persist to some extent in 2022—along with additional challenges brought on by new COVID-19 variants—however, the construction industry remains cautiously optimistic about the future.
Recent Industry Performance
During 2021, total construction starts increased 12.0%, reaching $901.0 billion, according to Dodge Data & Analytics (“Dodge Data”). Meanwhile, the Dodge Momentum index grew 23.0% in 2021, the highest annual gain since 2005. Richard Branch, chief economist for Dodge Construction Network— an umbrella brand which combines Dodge Data with the Blue Book Network—notes, “The increase in construction starts was impressive given the many challenges the industry faced during the year. Higher material prices, labor shortages, and multiple waves of COVID infections threatened to dampen the recovery. However, construction remained resilient and persistent throughout the year in the face of these difficult issues.”
While Branch anticipates that these challenges will continue throughout 2022, he says that the construction industry is “wellpositioned to make further gains fed by a growing pipeline of nonresidential projects waiting to break ground and the infusion of money directed towards infrastructure.” Overall, Dodge Data forecasts that construction starts will increase by 6.0% in 2022.
Other economists in the construction industry generally agree with Branch’s assessment and forecast. Ken Simonson, chief economist for the Associated General Contractors of America (“AGC”) notes, “Looking at 2022, I would say I’m nervously optimistic.” While construction looks to continue its upswing, Simonson is concerned that the Omicron variant and vaccine hesitancy among construction workers could hamper growth somewhat in 2022. “It means there is a much greater risk for severe illness from COVID…it adds to the difficulty construction firms will have fielding a full, healthy and eligible workforce,” he says.
Following is a more detailed look at the performance of the residential, nonresidential and nonbuilding construction sectors in 2021 as well as the forecast for 2022.
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