Presentation on Construction Outlook with emphasis on nonresidential building construction. Given at the AHR Expo in NYC at the Javits Center on Jan 21 & 22, 2014

1. 2014 AHR Expo
January 2014

2. Outlook for the Economy and
Construction
Presented by: Bernard M. Markstein
Reed U.S. Chief Economist

3. Outlook for the Economy and Construction
State of the U.S. Economy
 Economy improving
 Employment growing, but should be faster
 Inflation moderate
 The Fed begins to taper
 Housing/residential construction a positive
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4. Outlook for the Economy and Construction
Risks to the Economy
 The federal debt ceiling/Congress
 The Fed and interest rates
 Europe
 European government debt default
 The euro
 Energy (oil) prices
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5. Outlook for the Economy and Construction
Forecast: Construction to improve
Construction Spending and its Components
$ Billions
1,400
History
1,300
Forecast
1,200
1,100
1,000
900
800
700
600
500
400
300
200
100
0
02
03
04
Residential
05
06
07
08
09
Nonresidential Building
10
11
12
13
14
15
Heavy Construction
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
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6. Outlook for the Economy and Construction
Residential construction is
recovering, but from a low level
 Single-family housing market is on the mend, but much
further to go before it is back to normal
 Multifamily market has largely recovered, but still some
room for growth
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7. Outlook for the Economy and Construction
Multifamily Housing Starts
Thousands of Units, SAAR
500
450
Nation’s long-run (trend) need for
the next decade
High Estimate
(350,000 starts per year)
400
350
300
250
200
150
Nation’s long-run (trend) need
for the next decade
Low Estimate
(250,000 starts per year)
100
50
0
88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Source: U.S. Census Bureau
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8. Outlook for the Economy and Construction
Residential Spending Components
800
$ Billions
History
700
Forecast
600
500
400
300
200
100
0
02
03
04
05
06
Improvements
07
08
09
10
11
Single-family
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
12
13
14
15
Multifamily
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9. Outlook for the Economy and Construction
Forecast: Nonresidential construction to
strengthen
Construction Spending: Nonresidential Construction
475
Billion $, SAAR
450
425
400
375
350
325
300
275
250
225
200
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
2012
2013
2014
2015
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10. Outlook for the Economy and Construction
Nonresidential Construction Spending
100
$ Billions
90
80
2006
to
2012
’13
’14
’15
70
60
50
40
30
20
10
0
Hotel/Lodging
Office
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Commercial
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11. Outlook for the Economy and Construction
Nonresidential Construction Spending
110
$ Billions
100
90
2006
to
2012
’13 ’14
’15
80
70
60
50
40
30
20
10
0
Manufacturing
Healthcare
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Education
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12. Outlook for the Economy and Construction
Source: Philadelphia Federal Reserve Bank
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13. Outlook for the Economy and Construction
Source: Philadelphia Federal Reserve Bank
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14. Outlook for the Economy and Construction
Demand for HVAC Materials
This heat map is a view of the
forecasted demand for materials
within CSI division 23 (HVAC) for new
construction and additions (excluding
renovation and alteration). Reed can
look at the forecasted demand for 26
individual categories within division
23 including such as HVAC insulation,
instrumentation and control for HVAC,
facility fuel piping, pumps and
storage tanks, HVAC ducts and
casings, etc.
Source: Intelligent Leads by Reed Construction Data
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15. Outlook for the Economy and Construction
PPI: HVAC
190
1982 = 100, Not Seasonally Adjusted
Y/Y %
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Y/Y % (RHS)
180
177.1
7
6
170
5
160
2.8%
4
150
3
140
2
1
130
0
120
110
PPI Index (LHS)
100
Up 13% from
recession low
(March 2008)
-1
-2
-3
Source: Bureau of Labor Statistics
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16. Outlook for the Economy and Construction
HVAC Input Costs
500
2000 Q1 = 100
450
400
350
300
250
200
150
100
50
00 Q1
01 Q1
02 Q1
03 Q1
04 Q1
05 Q1
Copper pipe, Type L, 1/2" diam.
PVC pipe, Schedule 40, 2" diam.
Galvanized steel sheet metal ductwork
Source: RSMeans cost data
06 Q1
07 Q1
08 Q1
09 Q1
10 Q1
11 Q1
12 Q1
13 Q1
Steel pipe, Schedule 40, black, threaded, 2" diam.
Aluminum sheet metal ductwork
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17. Outlook for the Economy and Construction
Connect with Reed Construction Data
 Twitter
twitter.com/Bmarkstein
 Twitter
twitter.com/ReedConstrData
 Facebook
www.facebook.com/Reed-Construction-Data
 LinkedIn
www.linkedin.com/company/reed-construction-data
 web
www.reedconstructiondata.com
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18. Outlook for the Economy and Construction
Contact Information and Links
Bernard M. Markstein
 Office: 301-588-5190
 Mobile: 404-952-3381
 b.markstein@reedbusiness.com
 U.S. Forecast and Commentary:
http://www.reedconstructiondata.com/marketintelligence/articles/
 Blog:
http://www.reedconstructiondata.com/marketintelligence/bernie-markstein/
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