Underground Infrastructure - January 2023 - 13

UTILITY&COMMUNICATIONS
2023 Construction Outlook, Update
Daniel Shumate | Managing Director, FMI Capital Advisors Inc.
Th e captain of a large aircra┼┐t carrier
sees what he believes to be the light
of an oncoming vessel off the coast of
Newfoundland, Canada. Th e captain of
the ship then radios the vessel, urgently
saying to divert your course 15 degrees to
the north to avoid a collision with the ship.
Th e Canadians respond urgently and
say divert your course to the south to
avoid a collision. Th e captain then calls
again stating that he is the captain of one
of the largest ships in the U.S. Navy and
demands the oncoming vessel divert its
course. Th e Canadians then state, " this is
a lighthouse, your call. "
In the example above, the public markets
are the ship, and the Federal Reserve
is the lighthouse clearly communicating
the path it intends to take to combat
infl ation. Th e stock market has been
impacted by the actions of the Federal
Reserve, but continues to anticipate a
pivot to avoid a recession.
Th e story of 2023 belongs to two
actors - the Federal Reserve and infl ation.
Th e actions of the Fed, by raising
short-term borrowing rates, will lower
infl ation by reducing the money supply;
but raising rates has a real impact in the
economy. It starts at the top with government
fi nancing into the commercial
market for business borrowing and capital
fi nancing to individual households
through mortgage and credit card rates.
Savers have a slight boon, though
infl ation is actively decreasing the value
of their most liquid investment (cash).
Th e Federal Reserve has clearly stated
that a recession will occur, and that
Americans will feel the pain of the policies,
but those impacts are less painful
than long-term price increases.
Year
2022
2021
2020
TABLE 1: Annualized Infl ation Rates1
Jan
7.5
1.4
2.5
Feb
7.9
1.7
2.3
Mar
8.5
2.6
1.5
4.2
0.3
Apr May
8.3
8.6
5.0
0.1
Jun
9.1
5.4
0.6
Jul
8.5
5.4
1.0
Aug
8.3
5.3
1.3
Sep
8.2
5.4
1.4
Oct Nov
7.7
6.2
1.2
7.1
6.8
1.2
7.0
1.4
4.7
1.2
Dec
Ave
FIGURE 1: Estimated U.S. Construction Put-in-Place2
Infl ation appears to have turned a
corner from the highest rates during the
summer of 2022, but an average above
7.0 percent is signifi cantly greater than
the target of stable monetary policy and
a 2.0 percent infl ation rate. Th e consumer
felt the impact of infl ation over the
last 18 months, but if infl ation holds at
current levels, two-year price increases
would be back above 14 percent. Th ese
are price increases reminiscent of the
late '70s, early '80s.
So, what does this mean for underground
construction? Th e U.S. residential
construction market likely peaked in 2022
and ended an incredible period of growth
from the housing crisis in 2010-11. A decline
in residential suggests that the site
utility growth for residential development
will slow as developers slow down their
investment and delay projects.
However, while the Federal Reserve is
working to constrain the money supply,
investor-owned utilities continue to execute
their capital programs and Congress
has spent trillions on new infrastructure
and repair programs for water, wastewater,
fi ber and power.
FIGURE 1 illustrates this phenomenon.
While residential declines, the federal
spending and infrastructure repair programs
suggest that non-building structure
construction markets should be resilient.
Economic
factors
infl uencing
this
forecast include domestic and foreign
impacts of COVID-19; shortages of key
UndergroundInfrastructure.com | JANUARY 2023 13
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Underground Infrastructure - January 2023

Table of Contents for the Digital Edition of Underground Infrastructure - January 2023

Underground Infrastructure - January 2023 - Intro
Underground Infrastructure - January 2023 - 2
Underground Infrastructure - January 2023 - Cover1
Underground Infrastructure - January 2023 - Cover2
Underground Infrastructure - January 2023 - 3
Underground Infrastructure - January 2023 - 4
Underground Infrastructure - January 2023 - 5
Underground Infrastructure - January 2023 - 6
Underground Infrastructure - January 2023 - 7
Underground Infrastructure - January 2023 - 8
Underground Infrastructure - January 2023 - 9
Underground Infrastructure - January 2023 - 10
Underground Infrastructure - January 2023 - 11
Underground Infrastructure - January 2023 - 12
Underground Infrastructure - January 2023 - 13
Underground Infrastructure - January 2023 - 14
Underground Infrastructure - January 2023 - 15
Underground Infrastructure - January 2023 - 16
Underground Infrastructure - January 2023 - 17
Underground Infrastructure - January 2023 - 18
Underground Infrastructure - January 2023 - 19
Underground Infrastructure - January 2023 - 20
Underground Infrastructure - January 2023 - 21
Underground Infrastructure - January 2023 - 22
Underground Infrastructure - January 2023 - 23
Underground Infrastructure - January 2023 - 24
Underground Infrastructure - January 2023 - 25
Underground Infrastructure - January 2023 - 26
Underground Infrastructure - January 2023 - 27
Underground Infrastructure - January 2023 - 28
Underground Infrastructure - January 2023 - 29
Underground Infrastructure - January 2023 - 30
Underground Infrastructure - January 2023 - 31
Underground Infrastructure - January 2023 - 32
Underground Infrastructure - January 2023 - 33
Underground Infrastructure - January 2023 - 34
Underground Infrastructure - January 2023 - Cover3
Underground Infrastructure - January 2023 - Cover4
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https://www.nxtbook.com/gulfenergyinfo/gulfpub/underground-infrastructure-september-2023
https://www.nxtbook.com/gulfenergyinfo/gulfpub/underground-infrastructure-august-2023
https://www.nxtbook.com/gulfenergyinfo/gulfpub/underground-infrastructure-july-2023
https://www.nxtbook.com/gulfenergyinfo/gulfpub/underground-infrastructure-june-2023
https://www.nxtbook.com/gulfenergyinfo/gulfpub/underground-infrastructure-may-2023
https://www.nxtbook.com/gulfenergyinfo/gulfpub/underground-infrastructure-april-2023
https://www.nxtbook.com/gulfenergyinfo/gulfpub/underground-infrastructure-march-2023
https://www.nxtbook.com/gulfenergyinfo/gulfpub/underground-infrastructure-february-2023
https://www.nxtbook.com/gulfenergyinfo/gulfpub/january-2023
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