Presentation to Construction Employers Association Nonresidential Construction Outlook Bernard M. Markstein U.S. Chief Economist Market Intelligence Reed Construction Data May 30, 2012
Reed Elsevier Reed Elsevier A world leading provider of professional information solutions in the Science, Medical, Legal, Risk, and Business Sectors. Reed Business Information (RBI) A leading global provider of business information, online data and marketing solutions. Reed Construction Data (RCD) A leading provider of construction information, market intelligence, and lead generation solutions.
Forecasts and Analysis Reed Construction Forecast Construction Starts Database Reed Market Fundamentals Market Intelligence Product Demand Report SpecTrends Expansion Index SpecAnalyzer Predict Plan Analyze Execute Building Product Marketing specedge SmartBuilding Index SmartBIM Solutions Construction Lead Services Reed Connect SmartSpecs DataLink
The Economy
Economy has been growing at a barely acceptable rate Employment growing, but not enough Unemployment rate down, but not for the right reasons Inflation moderate; oil prices falling
Housing recovering, but from a very low level Multifamily the one bright spot in housing Lending standards, although somewhat improved, remain relatively tight
Risks to the economy: Europe Energy (oil) prices Congress
Construction spending struggled in 2011
Construction Spending and its Components 1,400 1,300 1,200 1,100 1,000 900 800 700 600 500 400 300 200 100 0 $ Billions History Forecast 02 03 04 05 06 07 08 09 10 11 12 13 Residential Nonresidential Building Heavy Construction
Construction Spending Components 2005 2011 16.7% 55.9% 33.7% 31.1% 27.3% 35.2% Residential Residential Nonresidential Building Nonresidential Building Heavy Construction Heavy Construction 2005 Total - $1,104 Billion 2011 Total - $790 Billion
but will improve this year and beyond
RCD TOTAL STARTS (YoY) 50 45 40 35 30 25 20 15 10 5 0-5 -10-15 -20-25 -30-35 -40 Year-over-Year % Change
Total Construction Spending 1,250 Billion $, SAAR 1,200 1,150 1,100 1,050 1,000 950 900 850 800 750 700 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Total Construction Spending 20% Q/Q Percent Change, SAAR 15% 10% 5% 0% -5% -10% -15% -20% -25% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Residential construction is recovering, but from a low level
Residential Spending Components 800 700 $ Billions History Forecast 600 500 400 300 200 100 0 02 03 04 05 06 07 08 09 10 11 12 13 Improvements Single-family Multifamily
RCD RESIDENTIAL STARTS (YoY) Year-over-Year % Change 60 50 40 30 20 10 0-10 -20-30 -40-50 -60
Construction Spending: New Residential Construction 550 Billion $, SAAR 500 450 400 350 300 250 200 150 100 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Construction Spending: New Residential Construction 40% Q/Q Percent Change, SAAR 30% 20% 10% 0% -10% -20% -30% -40% -50% -60% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Nonresidential building construction will strengthen throughout 2012 and 2013
RCD NONRESIDENTIAL STARTS (YoY) 50 Year-over-Year % Change 40 30 20 10 0-10 -20-30 -40-50 -60
RCD COMMERCIAL STARTS (YoY) 75 Year-over-Year % Change 65 55 45 35 25 15 5-5 -15-25 -35-45 -55-65
RCD INSTITUTIONAL STARTS (YoY) 60 Year-over-Year % Change 50 40 30 20 10 0-10 -20-30 -40-50
Construction Spending: Nonresidential Building 500 Billion $, SAAR 450 400 350 300 250 200 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Construction Spending: Nonresidential Building 30% Q/Q Percent Change, SAAR 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% -35% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Heavy engineering (nonbuilding) construction has held up best over the last few years and is expected to continue to improve over the next few years, though at a modest rate
RCD HEAVY ENGINEERING STARTS (YoY) 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0-10 -20-30 -40-50 Year-over-Year % Change
RCD HEAVY ENGINEERING STARTS (3-Month Moving Average, YoY) 60 3-Month Moving Average, Year-over-Year % Change 50 40 30 20 10 0-10 -20-30 -40
325 Billion $, SAAR Construction Spending: Heavy Engineering 300 275 250 225 200 175 150 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
40% Construction Spending: Q/Q Percent Change, SAAR Heavy Engineering 30% 20% 10% 0% -10% -20% -30% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
A look at the region s performance
Construction Starts 7,000 6,500 6,000 5,500 $ Millions Ohio 48.7% 2005 2009 5,000 4,500 4,000 7.1% 2010 2011 3,500 3,000 2,500 2,000 1,500 1,000 500-1.6% Cleveland 39.2% 2.4% -10.2% 0 Source: Reed Construction Data
Heavy Engineering Construction Starts 1,200 $ Millions 1,100 2003 1,000 2005 900 800 700 600 500 2.4% 33.5% 13.2% 2006 2009 2010 2011 400 300 200 100 0 30.3% -9.6% Source: Reed Construction Data
Nonresidential Construction Starts 1,600 1,500 $ Millions 39.2% 86.3% 1,400 1,300 1,200 1,100 1,000 900 57.4% 2003 2005 2006 2009 800 700 600 500 2010 2011 79.8% 400 300 31.5% 200 100 0 Source: Reed Construction Data
Residential Construction Starts 2,400 $ Millions 2,200 2,000 1,800 1,600 1,400 1,200 1,000 2003 2005 2006 2009 2010 2011 800 600 400-10.2% 0.2% 2.4% 200 0-3.3% 1.1% Source: Reed Construction Data
We do not have great highways because we are a great nation. We are a great nation because we have great highways. --DeWitt Greer, Chairman of the Texas Highways and Public Transportation Commission, 1969-1972
Questions?
Connect with Reed Construction Data: Twitter https://twitter.com/#!/reedconstrdata Facebook http://www.facebook.com/pages/reed- Construction-Data/69650102674?ref=ts LinkedIn http://www.linkedin.com/company/reedconstruction-data
Bernard M. Markstein Office 301-588-5190 Mobile 404-952-3381 b.markstein@reedbusiness.com www.reedconstructiondata.com U.S. Forecast: http://www.reedconstructiondata.com/constructionforecast/us/ Blog: www.reedconstructiondata.com/bernie-markstein