June 18, 2015
Article by Joseph Natarelli, National Construction Industry Group Leader, and Anirban Basu, Marcum's Chief Construction Economist, "2015 Remains Filled With Promise," Featured in Construction Accounting & Taxation
Coming into 2015, many economists were forecasting above 3 percent growth. Some still are. Tailwinds, such as a booming stock market, lower fuel prices, rapid job growth, and early evidence of sharper wage gains, led forecasters to believe that 2015 was shaping up to be the best year for the economy since 2005, the last year the U.S. economy expanded more than 3 percent over the course of a calendar year (at 3.4 percent).
The construction industry was primed to lead the charge. 2014 saw the highest level of construction spendings ince 2008, according to the U.S. Census Bureau. Construction employment surged during the fourth quarter of 2014, and the industry's labor force dynamics were showing signs of improvement. All signs pointed toward a glowing start to 2015 for the construction industry.
The year, however, has gotten off to a disappointing start. Certain headwinds were at least partially foreseeable. Winter comes once a year and with it comes snow. Ice storms impacted many southern communities for days on end. Once again, the frigid temperatures cut into construction activity. A stronger U.S. dollar predictably frustrated export growth. West Coast ports had been chaotic for months, and supply chain interruptions were inevitable.
The real source of disappointment, however, came in the form of consumer spending. Given recent job creation and wage growth as well as lower fuel prices, retail sales were expected to be stronger. Every dollar saved at the gas pump should have helped to boost retail segments. Economists estimate that every penny reduction in the price of gasoline translates into a billion dollars of additional spending power. To date, consumers have been spending less of their fuel savings than anticipated. According to the Census Bureau, sales from the nation's retail and food sectors dropped 0.8 and 0.6 percent in January and February, respectively. Consumers will have to pick things up considerably if the economy hopes to hit the 3 percent growth mark this year.