I hope you enjoyed Memorial Day Weekend – our first relatively “normal” one after the pandemic. Well if you enjoyed the rain we had where I was from Friday night to Monday morning. It was perhaps the rainiest MDW I can remember. Fortunately, most Americans are getting a second chance to appreciate the simple things in life that we couldn’t enjoy safely during the past year.
As everyone got ready for the long weekend, we finalized the Marcum Construction Index for the first quarter. It was another breath of fresh air. Although the commercial real estate sector is still poised for a comeback, contractors were increasingly confident in the first quarter of 2021, with 65% projecting their sales will increase in the next six months and fewer anticipating declining profit margins.
There were other good signs. Residential housing is booming, as any of you who are buying or selling homes are well aware. Thanks to both historically low interest rates and inventory, along with the desire of many people to move from cities to suburbs during the pandemic, residential construction spending rose to $734.5 billion in March – a substantial 23.3% increase since last year and the highest level on record. The question now – and it’s a big one – is whether residential home builders will be able to stay a few steps ahead of the labor shortage and scarcity of materials.
And, as the report outlines, almost all signs are “Go!” in the broader economy. The GDP increased at 6.4% annually in the first quarter alone, after three consecutive quarters of growth – bringing the real GDP to a higher rate than in Q1 2020. Meanwhile, we recovered 63% of the jobs the country lost during the early weeks of the pandemic, with national unemployment now down to 6.1%. Consumers are feeling optimistic, too, with one recent survey showing consumer sentiment up 23% since the crisis hit. Total retail sales are now up 17.1% since February 2020, though most sales are online.
What all this means for Marcum’s clients is that now is the time to plan. Many businesses are still transitioning out of pandemic mode, but with the number of vaccinated Americans continuing to climb every day – we had zero deaths from COVID in New York City Tuesday – the economy is recovering at a faster pace than many people expected. Summer is almost upon us, and people are ready to enjoy it. Business is going to come roaring back in sectors like restaurants, entertainment, and hospitality very soon.
Making the most of this growth, if you’re still trying to recover from the last year’s slowdown, is going to take some careful strategizing. Our latest Marcum CEO survey shows that, while the business outlook among middle-market CEOs continues to improve, they are concerned about rising post-pandemic inflation. Hiring remains a significant challenge across industries. And the recovery still remains uneven, with leaders in construction, energy and utility, real estate and financial services the most optimistic about the next 12 months, and retail CEOs the least, given slow foot traffic in stores.
We’ve been helping many businesses take a close look at their budgets and operations so they can position themselves to take advantage of the rebound. With new strains of the coronavirus spreading in other parts of the world, there’s no telling what the future may bring, but for the moment, there are many opportunities to make up for lost time.