Construction Industry Outlook for 2019
The first quarter of 2019 is showing signs of a slowdown for the Construction Industry, and trade groups like FMI and other construction associations have been acknowledging the slower pace. An indication from the Dodge Momentum Index shows a 4.7% increase in January followed by a 4.4% decrease in February, effectively wiping out January’s gain. Another key item includes the U.S. Government’s budget for 2020, which allocates less money to construction and infrastructure projects. The question will be: Can the states and cities – via gasoline tax increases and city income tax increases – offset some of the decreases by the Federal Government? We have seen this in Ohio both at the state level with the gas tax increase, and the city level (Akron) with an increase in the income tax rate.
Outside the government sector, it is expected that there will be a decrease in construction for the religious sectors, lodging sectors and multi-family housing with stable volume in transportation, education and manufacturing. Increases are expected for residential improvements, amusement and recreation, power, sewage and trash disposal.
Continued struggles with attracting and training skilled labor force positions will slow down established construction projects because there are not enough bodies to create an increase. Companies will have to review, embrace and invest in technology that will increase the productivity of the skilled labor force to offset the decline in skilled workers.
General contractors are going to have to ensure they are utilizing the best subcontractors on their jobs. Prequalification of subcontractors will continue to gain traction which will involve not only financial viability, but a more detailed review of technical capabilities and access to a skilled workforce.
In conclusion, 2019 looks like a slight drop in overall contractors spending. Much of this will depend on the economy and whether it can maintain its strength, but companies need to be aware and manage their balance sheets to ensure they have the financial stability to get through a downturn – whether it is a slight dip or a significant hole.
Dale A. Ruther?>
CPA, CIT, CDS, CCIFP
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