As 2015 concluded many in the construction trades were crunching numbers and looking to the future. 2015 was another good growth year for construction in general and a very nice year for the landscaping sector.
All the gurus and experts forecasted 2016 to more of the same, which is happy news. Then came the stock market doldrums at year end. Now we learn that several key economic sectors or measurements struggled during the first quarter of this year. The common catalyst seems to be the downturn in the oil/gas sectors.
Oil
Oil prices have fallen. Good news for consumers because of low gasoline prices, but bad news for everyone making money in the oil industry. And the reach of who that is surprising. Obviously the oil companies have greatly slowed their investments into exploration and development of new sources. But, consider all the businesses tangent to the industry. Even Caterpillar announced a sever downturn in their business.
Oil prices need to elevate to balance out the price formula and they will. Why they fell so fast is a matter of debate. Yes there might have been strategic moves by other oil producing countries to squash American oil development. However, lets not forget that need always supersedes fiddling by governments.
The need for the amount oil being pumped into the worldwide supply simply wasn’t there.
Supply and demand is the natural order in an economy. Even with government meddling’s supply and demand will always balance out pricing.
Economic Rebalancing
Back to the state of our economy, temporary rebalancing happens all the time. When one industry is experiencing it we hardly notice. Get a few involved and we see what we’ve lived through these past months. I’m an eternal optimist. So, I believe we witnessed market adjustments in a few industries and those adjustments will come to a quick end.
The U.S. consumer is once again the key driver of our economy. We consumers are in good shape. For most; jobs are secure, incomes are rising, house values are greatly improved, and even debt is dropping. Thankfully people are spending money. Retail sales have shown good results too.
I prefer to follow the forward looking economists, not the ones who analyze what happen 3 months ago and assume more of the same is coming. By the way, even economist joke that the discipline of “economists” was created to give weather people someone to laugh at.
Anyway, the forward looking guys say consumer spending remains strong all year and even grows in the second half. One said the U.S. consumer will drive the world economy to a better place by year end.
The Landscaping Economy
So what about construction? According Dodge and others, construction spending will be higher this year than last. There are increases in construction planning. And, nothing seems to be derailing these trends. Of course, more construction means more work for the landscape trades.
Construction hiring is increasing almost in every state. In fact, most say finding people to fill out crews is the hardest issue they face right now. Landscapers tell me this everyday. Several have claimed if they could find the people they would add another crew because they are turning away work.
The Dodge Momentum Index shows the 4 year long growth curve continuing. Construction starts are rising to about a 6% rate. Construction has been a bright spot for 4 years and few claim a drop off is coming in the next couple of years.
Architecture Billing Index is also showing strength. As stated by the Construction Data Company in a recent report, “March’s Architectural Billing Index reflects increased design activity.”
So it would seem even with the rebalancing going on in certain sectors, the construction and landscape trades are still expecting another pretty good year.
