While some economists foresee a slowdown in the overall economy and a flat construction industry in 2019, the precast concrete sector could fare slightly better. There is no single factor that points to a solid year ahead for precasters, but many variables should fall in line to keep the slow-but-steady growth pattern in place for at least one more year. Our annual Precast Forecast predicts a 3% increase in total sales next year, raising the industry’s bottom line to $21.2 billion in annual sales of precast concrete, prestressed concrete and reinforced concrete pipe products in North America.
If that forecast holds true, the precast sector should fare slightly better than the overall construction industry, which appears headed for flat or low single-digit growth in 2019, according to several of the leading construction economists, who see a period of slow growth ahead.
“The fundamentals continue to be sound,” according to Robert A. Murray, chief economist for Dodge Data and Analytics. Speaking at the 2019 Dodge Construction Outlook Conference last fall, Murray said his data points to a deceleration of the double-digit growth experienced the last several years as the current cycle winds down.
That doesn’t mean the construction industry will necessarily be declining in the coming years, Murray noted. “It’s a deceleration – a slower rate of growth, but not a decline.”
Murray’s forecast actually shows a 0% rate of growth for 2019, but that is not a pessimistic outlook, he stressed. After a 10-year period of orderly growth, we are “maintaining the enhanced level that we achieved in 2018,” he said.
Ken Simonson, chief economist for Associated General Contractors of America, said contractors are bullish on 2019, based on a recent survey completed by more than 1,300 AGC members. The survey asks contractors to forecast whether they believe the dollar volume of available projects in the coming year will be higher, lower or about the same. When more contractors respond higher than lower, the net is positive. Simonson noted that all of the construction categories in the survey came out as a net positive. More specific to the precast sector, one of the highest levels of confidence came in the water and sewer category, where positive responses outpointed negatives by 14 points.
The outlook appears positive in those sectors that would be of interest to most precasters. Categorized as nonbuilding construction, this sector would include highways and bridges, sewer systems, stormwater conveyance and storage, utilities and other environmental and public works. The Dodge outlook predicts growth in this sector, with total public works rising 4% in 2019.
Ty Gable, NPCA president, agrees that the 10-year run of growth is probably not sustainable, given the normal construction cycle. “We’ve recovered most of that 40% crash in business felt by most precasters during the Great Recession, but a day of reckoning is coming. Probably not in 2019, but more likely in the last half of 2020 or in 2021. It’s just part of the normal cycle,” he said. “It doesn’t appear to be anything drastic, but more of a decline in the high single digits over a couple years, followed by a return to orderly growth.” That could all change, Gable added, but for now, most precasters should be confident that there will be plenty of opportunities ahead.