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November 27th, 2018
With the end of the year approaching, it’s decision time. Plans and operating budgets are in the final stages, and you may be considering how equipment financing fits into your 2019 budget.
To serve as a guide in these final decisions, here are some economic forecasts for 2019 and what they mean for the construction industry.
The headlines will tell you the economy is in a bright spot, but there are elements of those news reports that may cast a few shadows on what the coming months may bring.
In the U.S., the forecast for total construction stands at $808 billion, which is even with the $807 billion that was predicted in 2018, according to the 2019 Dodge Construction Outlook from Dodge Data and Analytics.
This points to less robust economic growth in the forecast for next year. First, the benefits we enjoyed from the tax cuts in 2018 will start to fade. But what’s most significant, economists say, is that short-term and long-term interest rates will increase.
The report notes this forecast falls in line with the more recent trend of deceleration in construction activity after it spiked earlier in the decade. Even so, 2019 is adding another $1 billion worth of projects, and if you look closer, the opportunities start taking shape.
Dodge forecasts a 2 percent decrease in residential construction in the U.S. as a whole. However, Construction Connect reports double-digit increases in 2018 in residential building permits in the following metro areas: Orlando, Charlotte, Minneapolis-St.Paul, Raleigh, Houston, Austin, Phoenix, Jacksonville, San Diego and Salt Lake City. With the demand for housing in these areas, there’s no reason to believe the projects would brake to a halt.
The biggest commercial construction growth areas of 2019 include health facilities, education facilities, institutions, manufacturing plants and public works projects.
Like everyone else, construction companies are scrambling to find solutions to do more with less, because many forces are putting pressure on the project costs.
As interest costs are expected to rise, so too are labor costs.
As of November, unemployment sits at a 50-year low at 3.7 percent, creating a labor crunch across just about every industry. While wages continue to rise, project managers will have their hands full keeping crews fully staffed and responding to the ongoing pressure to increase wages. In some metro areas the issue is even more pronounced, with unemployment resting at well below the 3 percent range, including Minneapolis, San Francisco, Orlando, Raleigh, Jacksonville, Kansas City and Oklahoma City.
At this time, the decision to invest in new equipment can be a tough one, whether it’s heavy-duty equipment that runs more efficiently and helps you get the job done faster, or you’re looking at new tech tools. These come at a high price, but in the long run, they can save time and cost.
For example, a drone can let a surveyor review a site in minutes. And augmented reality technology can render 2-D plans into 3-D visual models. These give an unprecedented look at what a finished project will look like, inside and out, allowing architects and managers to discover and anticipate design flaws early — before the materials are ordered and delivered. With these tools, projects can stay on deadline and avoid unnecessary overruns.
Planning and budgeting for the next calendar year can feel a bit like playing a game of chess against the world at large. Whether you’re looking at replacing equipment or increasing your tech capacity, working with First Western Equipment Finance can help you lock in the best interest rates and affordable payments and start the construction season in a position that puts you at the front of the pack.