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Construction Growth Forecast Downgraded
CMD Cuts Prediction For 2015

Both the broader residential and nonresidential sectors underperformed in the second quarter, so a firm that tracks building activity slashed its forecast for the year by nearly two percentage points.

Because construction starts in the second quarter came in below expectations, a respected U.S building industry data management and forecasting firm has downgraded its total projection for 2015.

Construction Market Data had predicted a growth rate of 9 percent across all sectors earlier this year -- but its updated forecast has been reduced to 7.1 percent.

Both the broader residential and nonresidential sectors underperformed in the second quarter, mostly because of less-than-anticipated business investment, CMD said in a news release.

"Last quarter (April-June) saw the U.S. economy post somewhat disappointing results, and the construction industry followed suit," said Alex Carrick, CMD chief economist.

"However, the transitory nature of many of the economy's ailments and positive signs from the labor market should translate into more robust growth in the construction market over the long term," Carrick said.

The commercial office, education and medical construction sectors all lagged in the nonresidential category, CMD said. One bright spot is industrial construction. This sector surged ahead, mainly because of a $2 billion Tesla Motors battery factory in Nevada, and a $1 billion methanol plant in Louisiana.

Single-family starts increased 9 percent for the fifth straight quarter of growth, but the multi-family sector did not perform as expected.

"The multi-family market has become harder to read," said Carrick. "The growth of mixed-use projects with a combination of retail, office and residential space is causing some confusion about how projects get labeled, meaning some multi-family developments in these larger projects are getting counted in different categories."

One other area of growth in new construction last quarter was civil engineering, which grew 7.7 percent from the same period last year. Spending on infrastructure projects from local and state governments is making up for tightened federal budgets in this area.

CMD is a leading provider of construction activity data and advises building industry professionals throughout the U.S. and Canada.

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September 17, 2019, 10:59 pm PDT

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