Vermeulens Market Outlook Forum – Q2 2023

Vermeulens’ market reports are based on bid prices in the Nonresidential Construction Industry. Forecasts are based on leading indicators and historical comparative analysis.

Fed Watch – Another Growth Recession?

• Ongoing increases raised interest rates to 5.25% in May, along with continued quantitative tightening. This has caused a decrease in interest rate-sensitive sectors such as residential construction and investment. For insight into central bank policy, go to Another Growth Recession? at Green at No Cost
• Commodity prices continue to decline to long-term averages
• The New York Stock Exchange has increased by 9.58% year over year but remains below its prior peak
• Total Employment Growth through Q2 was 228,000 on average per month, well above recession levels
• Gross Domestic Product: Growth for 2023 was 2.39%. Q2 2023 increased to an annual rate of 2.56%

Beyond Estimation Market Outlook

• Vermeulens Index of Nonresidential Construction Prices rose in Q2 of 2023 at 0.75% per month
• Short-term construction price inflation is forecast to continue at 9%, tapering toward 6% for 2023, 5% for 2024, then settling to a long-term average of 4%
• Volatility is declining. We now recommend bidding contingencies in the 0 to 10% range for projects bidding in the near term
• Supply Chain Shortages, labor shortages, and increased backlogs have impacted bid prices. However, supply chain improvements and fear of recession have reduced the cost impact of these factors
• Architectural Billings went up slightly in May and June but continued down by the end of June
• Construction Dollar Volume: Residential construction went up in Q2 by 3.80%; Nonresidential construction is up 31.2% year to year; and Infrastructure spending decreased  0.08% in Q2. For insight into growth trends in these sectors, go to Sectoral Watch at Vermeulens Blogs and Industrial Revolution Redux at Green at No Cost
• Construction Job Growth: Approximately 62,000 construction jobs were added in Q2 or +0.79%; construction employment is now 3.7% above pre-pandemic levels

View the Market Outlook Forum slides →