GDP ended 2015 strongly with an annual estimated growth rate of 2.4%. The overall U.S. economy continues to improve.
Positive economic conditions continue to support growth in demand for nonresidential construction. The nonresidential construction sector enjoyed double-digit growth in 2015, and strong momentum is expected to continue in 2016.
The AIA’s semi-annual Consensus Construction Forecast, a survey of the nation’s leading construction forecasters, is projecting that nonresidential construction spending will enjoy an 8.3% increase in 2016.
“2016 will challenge contractors’ growth plans, and there will always be new challenges to face,” said Chris Daum, CEO of FMI. “However, economic factors for construction are about the best we have seen since the recession, and we are looking for continued progress in 2016.”
Lighting industry performance in 2014
The National Electrical Manufacturers (NEMA) Lighting Systems Index, a measure of demand for lighting equipment, increased by 4.8% year-over-year and by 4.4% quarter-to-quarter during the third quarter of 2015.
The increase was driven by the fixtures component of the index, which gained ground on a year-over-year basis, while the emergency lighting, ballast and lamp—large and miniature—components recorded offsetting year-over-year declines.
While light fixtures did well, traditional lamp technologies largely fared poorly. NEMA’s Linear Fluorescent Lamp Shipments Index for the third quarter of 2015 continued the downward trend that began in 2014. The index for T12 lamps declined for the seventh consecutive quarter, dropping by 40.4% on a year-over-year basis. T8 and T5 shipments also continued to decline, decreasing by 10.9% and 10.6%, respectively, on a year-over-year basis.
High intensity discharge (HID) lamp shipments, as measured by NEMA’s HID indexes, declined in the third quarter of 2015. Sodium vapor lamp shipments fell 12.3% compared to the same period last year, shipments of mercury vapor lamps decreased by 16.3%, and shipments of metal halide lamps decreased by 14.5% year-over-year.
LED A-line lamps posted another strong showing in 2015Q3, surging 237.2% during the quarter on a year-over-year basis. Halogen A-line lamps posted a year-over-year increase of 33%. In contrast, incandescent A-line lamps decreased by 31.5% while compact fluorescents lamps (CFL) dropped 28.0%. Compared to 2015Q2, LED shipments rose 17.2%, while halogen A-lines increased 4.6%. CFL shipments saw a quarter-to-quarter decrease of 16.3% and incandescent A-line lamp shipments decreased 16.5%.
2015 Construction Spending
Growth in construction spending in 2015 continued to outpace the U.S. economy. Estimated total put-in-place construction spending—actual numbers, not seasonally adjusted—grew at a very strong 10.5% in 2014. Based on projected year-end numbers at the Commerce Department, total put-in-place construction spending reached $1.097 trillion in 2014.
Residential construction saw the biggest gains in 2015, with a projected 12.8% increase in spending put-in-place, while nonresidential construction spending grew by a projected 9%. Private nonresidential grew 12% while public nonresidential grew 5.2%.
Looking at individual nonresidential building markets, manufacturing, office and commercial led growth with the biggest gains, with increases in put-in-place construction spending of 44.5%, 30.7% and 22%, respectively.
Current Construction Indicators
As a leading indicator of construction activity, the American Institute of Architects’ (AIA) Architecture Billing Index, or ABI, reflects the approximate 9- to 12-month lead time between architecture billings and construction spending.
There were a few months where demand for design services decreased on a month-to-month basis in 2015, but the ABI concluded the year on a positive footing. During eight months of the year, the ABI stayed above 50, indicating an increase in billings and signaling an expansionary market for design services. The year ended on a positive score of 50.9, indicating a slight increase in demand.
Regionally, the West (53.7) and South (53.3) had a more optimistic outlook than the Northeast (46.7) and Midwest (46.1). The multifamily residential (52.9) and institutional markets (52.2) indices suggested growth, while the commercial/industrial (4.73) and mixed-practice sector (46.5) ratings suggested contraction. The new project inquiries index was strong at 60.2.
“As has been the case for the past several years, there continues to be a mix of business conditions that architecture firms are experiencing,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “Overall, however, ABI scores for 2015 averaged just below the strong showing in 2014, which points to another healthy year for construction this year.”
The electrical industry expressed optimism about current economic conditions during eight months of 2014.The National Electrical Manufacturers Association’s (NEMA) Electroindustry Business Conditions Index (EBCI) for current conditions in North America stayed at or above a score of 50 for every month except June, September, October and December. Following a strong score of 58.3 in November, the December score was 41.2, with 35% of the panelists reporting conditions deteriorated from November to December, 18% stating they improved, and the rest (47%) saying they did not change.
December’s EBCI for future North American conditions remained above the 50-point breakeven mark but retreated to 52.9 from 55.6 in November.
Meanwhile, 71% of construction firms plan to expand their payrolls in 2016, according to a survey conducted by the Association of General Contractors of America. The Challenges Facing a Growing Industry: The 2016 Construction Industry Hiring and Business Outlook indicates contractors will experience a positive year despite tight labor conditions, regulatory burdens and IT security challenges. Respondents expect a range of public and private markets to grow.
“The construction industry will continue to recover in 2016 as many firms add to their headcount amid growing demand in a range of private and public sector markets,” said Stephen E. Sandherr, the association’s chief executive officer. “The industry also faces a number of challenges that have the potential to dampen, and possibly even undermine, the sector’s recovery.”
AIA Consensus Forecast Predicts Growth for the Nonresidential Construction Market
Construction spending greatly exceeded expectations in the nonresidential market in 2015, and this year should see healthy growth levels as well. There continues to be significant demand for hotels, office space, manufacturing facilities and amusement and recreation spaces.
The American Institute of Architects’ (AIA) semi-annual Consensus Construction Forecast, a survey of the nation’s leading construction forecasters, is calculated as an average of all forecasts provided by panelists that submit forecasts for each of the covered building categories: Dodge Data & Analytics, IHS Economics, Moody’s, FMI, CMD iSqFt, Associated Builders and Contractors and Wells Fargo Securities.
The AIA Consensus Forecast is projecting that spending will increase 8.3% in 2016, with next year’s projection being an additional 6.7% gain.
“While rising interest rates could pose a challenge to the U.S. economy, lower energy prices, improved employment figures and an enacted federal budget for 2016 are all factoring into a very favorable outlook for the construction industry,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “And after several years of challenging economic circumstances the institutional project sector is finally on very solid footing.”
Click here to see each of the panelist’s projections.