The US construction industry is expected to contract by 6.5% in real terms in 2020, and 2.0% in 2021.
With economic activity expected to contract by as much as 8% this year, and the surge of new COVID-19 cases in the southern and western parts of the US showing no signs of abating, the construction industry is anticipated to be severely hit this year.
While all construction activities have been allowed to continue in most parts of the US since the pandemic started, many projects in the bidding or final planning stages have been delayed or cancelled, largely due to the uncertainty surrounding the economy, falling demand for new works, and concerns related to COVID-19 safety measures at construction sites.
Over the remaining part of forecast period (2022-2024), the industry is expected to recover, with the industry’s output expected to register an annual average growth of 1.1% in real terms between 2022-2024.
The government’s plans to increase investment in infrastructure construction – especially in critical subsectors such as transportation (roads, ports and bridges), water and sewerage, and telecommunications – should support the sector in the coming years.
The Federal Reserve is expected to keep interest rates at the zero-lower bound for a prolonged period of time, and continue to support the recovery through large-scale asset purchases and emergency lending programs.
However, key risks remain.
The degree of social distancing (both voluntary and compulsory) that will prevail in the second half of the year will be higher than previously anticipated, and even with a full reopening of the economy, people are going to remain more cautious about consumption in the long-term.
Without a vaccine, how individuals and companies adapt to the new normal will be crucial for the recovery of 2020 and 2021, determining whether the economy will make a fast recovery or will need additional stimulus to endure the COVID-19 pandemic.
Furthermore, heightening political uncertainty over the upcoming presidential election, lower oil prices and financial volatility are other factors that could undermine confidence.
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