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Economist measures commercial contractors’ market concerns

Sources: Associate Builders & Contractors, Washington, D.C.

Amid the U.S. economy’s longest growth period on record, emerging weakness in business investment has been hinting at softening outlays, giving commercial and industrial construction contractors cause for concern, according to a mid-year economic outlook by ABC Chief Economist Anirban Basu.

“Given that every expansion in U.S. history has ended in recession, leaders of construction firms are rightly wondering when the record-setting expansion will end,” he observes. “Looking at conditions on the ground, it likely won’t be in 2019, but 2020 could be problematic for the broader economy and 2021 for a significant number of contractors.”

Among vulnerabilities that could trigger a recession next year, Basu cites trade wars; softening corporate earnings; slowing job growth; elevated levels of household, corporate and government debt; and Election 2020. Yet nonresidential building stakeholders have plenty of reasons to remain optimistic, he adds, noting how the economy has held up better than anticipated: Gross domestic product slowed from an annualized rate of 3.1 percent in the first quarter to 2.1 percent in the second quarter, despite projections of sub-2 percent levels.

“The economy could continue to prove resilient,” says Basu. “To date, the economy has navigated ongoing trade disputes and associated tariffs with aplomb. It has also withstood serial interest rate hikes, the longest federal government shutdown in history, extreme weather, shifting immigration policy, ongoing labor market shortages and a lengthy investigation regarding foreign influence in U.S. elections.”