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Recovery could be just around the corner

Negotiations between President Obama and Congress regarding the fiscal cliff have us all holding our breath over what the economy will do in the coming year. Will protracted posturing and negotiations via the media lead to a solution? And at what point does a solution (or lack thereof) help or hurt the economy?

These are thoughts and questions I hear from people each day. Everyone’s hope is that a solution – whatever it may be – puts our economy on stable ground and a continued path toward long-term recovery.

For a long time, many people in the construction industry have hoped that economic recovery is just around the corner. And after four years of looking around many corners, many of us have wondered if we’re just doing laps around the same square building over and over again.

With that said, I see new signs of optimism within the construction industry increase week by week. This optimism comes through quantifiable and anecdotal data. It suggests that the industry really is on the cusp of turning that elusive corner that we’ve been searching for.

For quantifiable, last month’s Construction Backlog Indicator, a monthly report produced by Associated Builders and Contractors’ chief economist, Anirban Basu, shows a continued rise in backlog for contractors across the country. Backlog is typically seen as a key indicator of economic health within the construction industry.

“While the nation’s nonresidential construction activity is likely to remain subdued as we approach the final months of 2012, the CBI is signaling that nonresidential construction spending will accelerate by mid-2013,” Basu noted. “However, this presumes the nation does not tumble over the fiscal cliff – a series of spending cuts and tax increases that kick in at the end of the year.”

The CBI in the third quarter expanded for the second consecutive quarter, to eight months – a 3.5 percent increase from the previous quarter. It’s measured in months and reflects the amount of construction work under contract, but not yet completed.

Construction spending also continues to increase. According to a Dec. 3 report by the U.S. Census Bureau, total nonresidential construction spending – including both private and public projects – is up 5.1 percent from one year ago.

Additionally, Robert Denk, the assistant vice president for forecasting and analysis for the National Association of Home Builders, had positive news.

“Expect to see the homebuilding industry hold steady at 41 percent of its pre-recession levels through the rest of 2012 and early 2013, Denk said. “It should be up to 55 percent by the end of 2013 and into the 70s by the end of 2014.”

This is up from the 27 percent level the industry was at for much of the downturn.

And the anecdotal data also shows optimism within the local construction market as contractors begin to hire more workers and call for new apprentices.

Business owners and managers are more upbeat. They talk optimistically about the future and are beginning to re-engage in civic activities that they had to take a break from while they tried to keep things stabilized at the office.

These developments – the quantifiable and the anecdotal – suggest reason to believe we might soon look around the corner and spot what we have been seeking for a very long time.

But our nation’s leaders have business to take care of before that is going to happen. We need them to seize the opportunity to amicably address the impending fiscal cliff in a way that adds stability to our economy.

As Basu concluded in his November CBI report, “the recovery in construction backlog, and in overall construction spending, would likely be more rapid today if not for the elevated level of uncertainty facing economic decision-makers.”

John Killin is president of the Associated Builders and Contractors’ Pacific Northwest chapter and executive director of the Independent Electrical Contractors of Oregon.

About John Killin

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