June 1, 2021

First Quarter Economics: The Good, the Bad, and the Ugly

By Anirban Basu, Chief Construction Economist, Marcum LLP

First Quarter Economics: The Good, the Bad, and the Ugly Construction

Issue 35 – First Quarter 2021

The Marcum Commercial Construction Index for the first quarter of 2021 reports that the industry has yet to reach the broader economy’s pace of recovery despite elevated contractor confidence. The construction industry has added 917,000 jobs since May 2020, equivalent to roughly 82% of the jobs lost during the initial months of the pandemic.

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The Good
The number of commercial real estate segments, contractor confidence increased steadily during the first quarter of 2021. According to ABC’s Construction Confidence Index, 65% of contractors expect their sales to increase over the next six months, up from just 34% a year earlier. As of April 2021, only 20% of contractors expected their sales to decline.

The Bad
While the longer-term nonresidential construction outlook is upbeat, current circumstances remain far from positive. Despite rising contractor confidence, broader economic recovery, and the promise of a sizable federal infrastructure package, nonresidential construction coincident indicators remain subdued.

The Ugly
Key policymakers including U.S. Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell believe that the recent surge in inflationary pressure is largely transitory. They believe, along with many other market analysts, that as infection totals abate and as supply chains become more orderly, inflationary pressures will be suppressed.

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