Outlook for construction spending improves with the upturn in the economy

Pent-up demand from the pandemic is creating a general spending surge that is helping to improve the outlook on construction spending over the next two years, according to a new report from the American Institute of Architects (AIA).

After nonresidential construction spending declined by about 2% last year, the AIA Consensus Construction Forecast Panel, in its mid-year update, is projecting that spending will decline an additional 3.9% this year, which is an improvement from the forecasted 5.7% decline reported in January. Nonresidential construction spending is expected to increase 4.6% in 2022.

The strongest design sector performers for the remainder of this year are expected to be health care facilities, up 1.4%, while a few other sectors should see only minimal declines, like retail, religious, and education. However, in 2022, virtually all the nonresidential building sectors are expected to see healthy growth, paced by lodging, as well as amusement and recreation, both of which saw steep declines during the pandemic.

“Even while momentum is developing behind most of the nonresidential building sectors, there are several potential potholes on the road to a construction recovery,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “Inflation is back on the radar screen given the surge in consumer spending, as well as the growing federal debt levels. Also, the global supply chain continues to face serious challenges that persist even well after initial pandemic related disruptions have largely subsided.”