Reprinted from Construction Executive
2019 construction spending is expected to continue rising, up 4.8 percent, although at a slower pace than 2018’s 6.5 percent growth, according to Atradius’s annual Market Monitor for the global construction industry. As the U.S. economic expansion slows down, commercial construction growth should decline slightly this year due to higher office vacancies.
Residential construction is expected to grow modestly on the back of wage growth, low unemployment and low inventories, while higher interest rates have an adverse effect. Nonresidential construction is projected to continue improving, largely supported by the $305 billion Fixing America’s Surface Transportation Act.
Construction businesses’ leverage and dependence on bank financing are generally high, and banks are generally willing to provide loans to the sector. Profit margins are expected to remain stable in 2019, as most businesses can pass on higher commodity costs (also triggered by import tariffs on steel and aluminum) to their customers. Elevated materials costs are expected to persist throughout 2019.
Payments in the industry have slowed to 54 days on average, as longer terms have increasingly become a method of attracting business from customers. Payment experience in the construction sector was decent in 2018, and the overall number of payment delays and insolvencies is expected to level off in 2019.
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