Bernard M. Markstein presented an economic and construction outlook to INTERCEM Americas on November 3, 2015. He discussed the moderate but slower than expected growth of the US economy and employment. He also reviewed risks including government spending cuts, interest rates, China, Europe, and energy prices. Markstein then analyzed trends and forecasts for residential, nonresidential, and heavy engineering construction spending between 2002-2016. He showed residential construction is recovering but multifamily and single-family construction remain below long-term needs. Nonresidential and heavy engineering construction are also growing but below prior peaks. In conclusion, Markstein provided his contact information.

1. May 7, 2014
US Economic and
Construction Outlook
INTERCEM Americas
Miami, FL
Presented by:
Bernard M. Markstein
Markstein Advisors
November 3, 2015

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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, too low?
 Federal Reserve and interest rates: how high, how
fast?
 Washington: lots of kicking the can down the road.
Is this any way to run a government?
 European and Chinese slow(er) economic growth,
hurts our exports and rest of the world economy
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 or
even a possible federal government shutdown
 Interest rates (the Fed)
 China
 European government debt default (Greece)
 The euro (Greece)
 Energy (oil) prices
 Russia?

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Construction
Overview

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47%
32%
20%
2002
Residential
Nonresidential Building
Heavy Construction
56%
27%
17%
2005
Residential
Nonresidential Building
Heavy Construction
2002 Total - $848 Billion 2005 Total - $1,104 Billion
Construction Spending Components
Source: U.S. Census Bureau
Overview of Construction

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56%
27%
17%
2005
Residential
Nonresidential Building
Heavy Construction
31%
36%
33%
2010
Residential
Nonresidential Building
Heavy Construction
2005 Total - $1,104 Billion 2010 Total - $806 Billion
Construction Spending Components
Source: U.S. Census Bureau
Overview of Construction

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56%
27%
17%
2005
Residential
Nonresidential Building
Heavy Construction
36%
34%
30%
2014
Residential
Nonresidential Building
Heavy Construction
2005 Total - $1,104 Billion 2014 Total - $962 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
36%
34%
30%
2014
Residential
Nonresidential Building
Heavy Construction
2002 Total - $848 Billion 2014 Total - $962 Billion
Construction Spending Components
Source: U.S. Census Bureau
Overview of Construction

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0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
1,300
1,400
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Residential Nonresidential Building Heavy Construction
$ Billions
History
Source: History – U.S. Census Bureau; Forecast – Markstein Advisors
Forecast
Forecast: Better Days Ahead
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
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
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)
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
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)
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
358
254 249 253
287
341
344
384
430
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
$ Billions
History Forecast
Source: History – U.S. Census Bureau; Forecast – Markstein Advisors
Residential Construction Spending
Overview of Housing

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0
50
100
150
200
250
300
350
400
450
Single-Family Multifamily Improvements
$ Billions
2006 to 2014 ’15 ’16
Residential Construction Spending
Source: History – U.S. Census Bureau; Forecast – Markstein Advisors
Overview of Housing

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Nonresidential
Building
Construction

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275 269
283
302
340
404
439
377
292
284
301 303
330
390
426
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
$ 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 2014 ’15 ’16
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 2014 ’15 ’16
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
288 290
313
0
50
100
150
200
250
300
350
400
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
$ Billions
History Forecast
Heavy Engineering Construction Spending
Heavy Engineering Construction
Source: History – U.S. Census Bureau; Forecast – Markstein Advisors

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0
10
20
30
40
50
60
70
80
90
100
110
120
Transportation Communication Power
$ Billions
2006 to 2014 ’15 ’16
Heavy Engineering Construction Spending
Source: History – U.S. Census Bureau; Forecast – Markstein Advisors
Heavy Engineering Construction

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0
10
20
30
40
50
60
70
80
90
100
110
120
Highway Water and Sewer Conservation
$ Billions
2006 to 2014 ’15 ’16
Heavy Engineering Construction Spending
Source: History – U.S. Census Bureau; Forecast – Markstein Advisors
Heavy Engineering Construction

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