Sharp Rebound Expected in Construction, Economist Says

July 6, 2015

Non-residential construction, led by manufacturing and commercial buildings, should see a sharp rebound in the second half of 2015, says Wells Fargo Senior Economist Anika Khan.

Khan spoke to attendees at a regional AEM membership event. 

Khan said the underlying fundamentals for the construction industry – and the economy as a whole – are much better than the numbers would indicate, noting that first quarter GDP seemed to show that the economy was shrinking.

Based on expected revisions to GDP as well as alternative measurements of economic activity, she said, it’s clear that while the pace of growth is sluggish, “it’s definitely not negative.”

Khan said key factors holding back economic growth in the first half of 2015 included:

  • Harsh winter weather;
  • The West Coast port dispute;
  • A stronger dollar; and
  • Lower oil prices.

While the first two factors have dissipated, there are still lingering effects from the stronger dollar and lower oil prices, Khan said.

Khan said the labor market is “the real strength of the economy” and should continue to grow. However, she said, manufacturers needed to watch for not an increase in interest rates, but a “winding down of the Fed’s balance sheet” as it begins to scale back on its investments.