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US construction market witnessing the amount of active companies plummet by 7%

Industry Sector

Construction

Published

23 November 2012

Author

Matt Bodimeade

Type of News

Market

The US construction market is recovering from its deepest downturn since the Great Depression, and the solution is neither quick nor easy.

The industry is expected to grow moderately through to 2018, with revenue increasing by around 2% per annum, as developers look to meet the needs of a growing population, and particularly as the oldest children of the baby boomers reach their peak in house-buying years.

Equally, an ageing population will fuel the demand for senior housing, while the renovation of older homes should provide a relatively constant revenue stream over the projection period. Other major commercial opportunities in the non-residential category include building healthcare and power generation establishments.

Since the beginning of the recession, the number of companies active in the market plummeted by 7%, amounting to 731,000 firms at the end of 2012, equivalent to 11% of the entire US market.

In 2006-2012, the industry experienced a period of consolidation, with many small and mid-size players formerly servicing the residential housing market being pushed out of business by large contractors working on commercial projects. Indeed, as the number of smaller players declined by 7% since 2006, large enterprises with 500 or more workers on their payrolls grew 5%.

All major housing indicators have recently reported gains: Housing starts have increased by 26% to an average annual rate of 719,000 in the first five months of 2012, compared to the prior year. New home sales have increased 17% and existing home sales have risen 7% in the first five months on an annual basis.

The backdrop for the construction industry is the fragile US economy, which continues to see slow employment growth, diminished funding from federal and state governments, and pervasive uncertainty. In 2012, the top-line numbers are not expected to show much change, but there will be variation within the major construction sectors, with some gains predicted for housing and commercial building assuming the US economy avoids recession.

While the US construction market should continue to recover into 2013-2018, principal economic weaknesses will persist, hindering opportunities for more solid growth.

For more information on the US construction market, see the latest research: US Construction Market

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