Engineering Inc. - January/February 2014 - (Page 4)
BY G E R RY D O N O H U E
.S. economic growth in
2014 and beyond will
depend largely on the
ability of 535 people to get their
act together, say economists.
"Congress has certainly done
a lot of things to stand in the
way of growth," says Bernie
Markstein, chief economist at
Reed Construction in Silver
Spring, Md. "It has failed in its
responsibility for fiscal policy.
If we could get a good budget
from the federal government
and raise the debt ceiling for
more than a few months, we
would remove a lot of uncertainty from the economy."
Such uncertainty is caustic
for the economy, says Karen
Blanford, research director of
global construction services at
IHS Economics in Lexington,
Mass. "If the political climate
doesn't improve, we're just
going to go from crisis to crisis.
That dampens consumer and
business confidence. Without
that confidence, nobody is willing to invest."
One statistic starkly highlights the fallout from this lack
of investment: Although the
United States is in the fourth
year of an economic recovery,
employment remains 1.8 million jobs below its prerecession
The engineering industry has
felt its share of pain. Although
has increased in 29 of the 36
months since it hit its lowest
point in October 2010, it is
still 7 percent below its peak,
which it last reached in February 2008.
"Firms aren't expanding
because they don't have any confidence in their backlogs," says
Steve Isaacs, division manager
for architectural and engineering services at FMI. "They're
discounting the work they have
underway because they're not
convinced it will keep going.
They're not even sure that the
work they have scheduled to
start will really start."
And yet, the American
economy remains a force. The
United States has one of the
largest population growth rates
among countries with advanced
economies, which fuels demand
for housing, goods and services.
The expansion in domestic natural gas and oil production provides a long-term reliable source
of affordable energy. According
to the International Energy
Agency, The United States will
surpass Russia in 2014 as the
world's largest oil producer.
Growth and GDP
Citibank forecasts U.S. gross
domestic product (GDP) to
grow 2.7 percent, significantly
outpacing the estimated 1.7
percent growth realized through
2013. From 2015-2017,
Citibank projects 3.1 percent
annual GDP growth.
That's progress. But it's nothing compared with projected
According to FMI, total construction spending will grow at
more than double the pace of
U.S. GDP. Construction spending is projected to increase by 7
percent in 2014 to $977 billion
and average 7.7 percent annual
growth from 2015-2017.
"Growth rates for construction are beginning to look
good," says Blanford, "but
a lot of that is because the
JANUARY / FEBRUARY 2014
2014 Construction Growth
To Outpace the U.S. GDP
market really bottomed out in
Case in point: residential
construction. The market
leaped by an estimated 18 percent in 2013, and FMI forecasts
annual growth exceeding 10
percent through 2017. That's
good. But, "even with these
growth rates," Blanford says,
"we're never going to see residential construction get back to
the precrash levels."
FMI's projection of $506 billion in residential construction
spending in 2017 is still nearly
20 percent lower than its 2006
Overall construction spending in the United States is
expected to top its 2006 peak
by 2017, due primarily to phenomenal growth in the power
sector. That rate should slow in
subsequent years, but the power
sector will still average 8 percent
growth annually through 2017.
"Everyone agrees we have a
need for power and the need is
going to get greater-both in
this country and abroad," Isaacs
Much of the recently discovered natural gas and oil
reserves are far removed from
population centers and refineries, requiring a dramatic expansion in the pipeline network.
According to the Interstate
Natural Gas Association of
America, the United States and
Canada will require between
28,900 and 61,600 miles of
new pipeline by 2030.
New clean-air regulations
will drive the power generation
industry to shutter existing coal
plants in favor of new naturalgas-powered plants.
Health care construction has
bucked demographic trends in
recent years. Both the growth
and the aging of the U.S. population was expected to fuel a
strong recovery in the sector,
but it is still more than 11 percent below its 2008 peak.
"There's a lot of uncertainty
in the health care market
because of the Affordable Care
Act," says Isaacs. "Nobody
knows how it is going to play
Additionally, the industry's
model for providing health
care has changed. "We're seeing fewer new big facilities,"
he says. "More and more care
Table of Contents for the Digital Edition of Engineering Inc. - January/February 2014
Engineering Inc. - January/February 2014
From ACEC to You
Extreme Weather Resistance
2014 Legislative Outlook
The Hard Market That Never Came
2013 Fall Conference Highlights
Members in the News
Mergers and Acquisitions
Engineering Inc. - January/February 2014