Third Quarter Construction Update: The Good, the Bad, and the Ugly
By Anirban Basu, Chief Construction Economist, Marcum LLP
Issue 41 – Third Quarter 2022
The Marcum Commercial Construction Index for the third quarter of 2022 saw the construction industry grapple with the same issues that affected it in the first half of the year: labor shortages and extraordinarily elevated materials prices.
The Good
Manufacturing-Related Construction
Supply chain issues related to the pandemic, tariffs implemented over the past half-decade, and geopolitical unrest and the resulting increase in energy prices, among other factors, have induced many producers to reshore manufacturing capacity.
The Bad
Residential Construction
The housing market entered 2022 with a ton of momentum but is heading toward 2023 with virtually none, and the reason is simple: higher borrowing costs. Due to the highest inflation in over four-decades, the Federal Reserve has been racing to raise interest rates.
The Ugly
Overall Nonresidential Construction
As of September 2022, nonresidential construction remains 0.1 percent below February 2022 levels in nominal terms (i.e., not adjusted for inflation). Considering that input prices are up more than 40% over that span, the real decline in nonresidential spending is significantly steeper.
