Presentation to the Washington, D.C. Chapter of the National Electrical Contractors Association (NECA), Wednesday, February 17, 2016

1. May 7, 2014
2016 Construction Outlook
Presented by:
Bernard M. Markstein
Markstein Advisors
Washington, D.C. Chapter NECA
Kenwood Country Club
Bethesda, Maryland
February 17, 2016

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The U.S.
Economy

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 Economy growing, but should be better
 Employment growing, but should be faster
 Inflation remains moderate
 Federal Reserve raising interest rates: how high,
how fast?
 Strong dollar: pluses & minuses
 Energy (oil) prices
Overview of the Economy

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 Washington less of an obstacle, but how much real
cooperation are we seeing?
 China: slow(er) economic growth impact on world
economy
 Europe showing signs of improvement
Overview of the Economy

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Risks to the Economy
 Failure to pass needed legislation leads to reduced
federal government spending in the near term
 China
 Energy (oil) prices
 Interest rates (the Fed)
 European government debt default (Greece)
 The euro (Greece)
 Russia?

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Construction
Overview

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47%
32%
20%
2002
Residential
Nonresidential Building
Heavy Construction
53%
29%
18%
2006
Residential
Nonresidential Building
Heavy Construction
2002 Total - $848 Billion 2006 Total - $1,167 Billion
Construction Spending Components
Source: U.S. Census Bureau
Overview of Construction

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53%
29%
18%
2006
Residential
Nonresidential Building
Heavy Construction
31%
36%
33%
2010
Residential
Nonresidential Building
Heavy Construction
2006 Total - $1,167 Billion 2010 Total - $809 Billion
Construction Spending Components
Source: U.S. Census Bureau
Overview of Construction

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53%
29%
18%
2006
Residential
Nonresidential Building
Heavy Construction
39%
35%
26%
2015
Residential
Nonresidential Building
Heavy Construction
2006 Total - $1,167 Billion 2015 Total - $1,097 Billion
Construction Spending Components
Source: U.S. Census Bureau
Overview of Construction

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47%
32%
20%
2002
Residential
Nonresidential Building
Heavy Construction
39%
35%
26%
2015
Residential
Nonresidential Building
Heavy Construction
2002 Total - $848 Billion 2015 Total - $1,097 Billion
Construction Spending Components
Source: U.S. Census Bureau
Overview of Construction

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0
200
400
600
800
1,000
1,200
1,400
1,600
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Residential Nonresidential Building Heavy Construction
$ Billions
History
Source: History – U.S. Census Bureau; Forecast – Markstein Advisors
Forecast
Forecast: The Rebound Continues
Construction Spending and its Components
Overview of Construction

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Residential
Construction

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0
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
2,500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Thousands of Units, SAAR
Nation’s long-run (trend)
need for the next decade
Low Estimate
(1.4 million starts per year)
Nation’s long-run (trend)
need for the next decade
High Estimate
(1.8 million starts per year)
Total Housing Starts
(3-Month Moving Average)
Source: U.S. Census Bureau
Shaded areas represent recession
Overview of Housing

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0
50
100
150
200
250
300
350
400
450
500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Thousands of Units, SAAR
Nation’s long-run (trend)
need for the next decade
Low Estimate
(250,000 starts per year)
Nation’s long-run (trend)
need for the next decade
High Estimate
(350,000 starts per year)
380k
Multifamily Housing Starts
(3-Month Moving Average)
Source: U.S. Census Bureau
Shaded areas represent recession
Overview of Housing

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0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Thousands of Units, SAAR
Nation’s long-run (trend)
need for the next decade
Low Estimate
(1.15 million starts per year)
Nation’s long-run (trend)
need for the next decade
High Estimate
(1.45 million starts per year)
759k
Single-Family Housing Starts
(3-Month Moving Average)
Source: U.S. Census Bureau
Shaded areas represent recession
Overview of Housing

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402
451
538
618 620
500
367
256 252 253
276
329
375
423
474
545
0
50
100
150
200
250
300
350
400
450
500
550
600
650
700
750
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
$ Billions
History Forecast
Source: History – U.S. Census Bureau; Forecast – Markstein Advisors
Residential Construction Spending

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0
50
100
150
200
250
300
350
400
450
Single-Family Multifamily Improvements
$ Billions
2006 to 2015 ’16 ’17
Residential Construction Spending
Source: History – U.S. Census Bureau; Forecast – Markstein Advisors

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Nonresidential
Building
Construction

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275 269
283
302
340
404
439
377
292
284
301 303
330
386
398
420
0
50
100
150
200
250
300
350
400
450
500
550
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
$ Billions
History Forecast
Source: History – U.S. Census Bureau; Forecast – Markstein Advisors
Nonresidential Construction Spending
Nonresidential Construction

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0
10
20
30
40
50
60
70
80
90
100
110
120
Hotel/Lodging Office Commercial
$ Billions
2006 to 2015 ’16 ’17
Nonresidential Construction Spending
Source: History – U.S. Census Bureau; Forecast – Markstein Advisors
Nonresidential Construction

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0
10
20
30
40
50
60
70
80
90
100
110
120
Manufacturing Healthcare Education
$ Billions
2006 to 2015 ’16 ’17
Nonresidential Construction Spending
Source: History – U.S. Census Bureau; Forecast – Markstein Advisors
Nonresidential Construction

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Heavy Engineering
Construction

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171 171 169
185
208
248
272 274
265
251
274 274
288 288
300
322
0
50
100
150
200
250
300
350
400
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
$ Billions
History Forecast
Source: History – U.S. Census Bureau; Forecast – Markstein Advisors
Heavy Engineering Construction Spending
Heavy Engineering Construction

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The D.C. Region

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0
25
50
75
100
125
150
175
200
U.S. D.C. Philadelphia NYC Boston Chicago LA
2000 to 2015
Total Residential Permits
(2000 = 100)
Source: U.S. Census Bureau
The Region

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0
25
50
75
100
125
150
175
200
U.S. D.C. Philadelphia NYC Boston Chicago LA
2000 to 2015
Single-Family Residential Permits
(2000 = 100)
Source: U.S. Census Bureau
The Region

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0
25
50
75
100
125
150
175
200
225
250
275
300
325
350
375
U.S. D.C. Philadelphia NYC Boston Chicago LA
2000 to 2015
Multifamily Residential Permits
(2000 = 100)
Source: U.S. Census Bureau
The Region

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Contact Info and Links
Bernard M. Markstein
 Office: 301-588-5190
 bmarkstein@verizon.net
LinkedIn
 www.linkedin.com/in/markstein3
Twitter
 @BMarkstein