Recession watch : ABC economist sees ‘ difficult times ’ through 2025
By Reporter Sebastian Obando
Anirban Basu
Associated Builders and Contractors Chief Economist Anirban Basu said the Federal Reserve ’ s tightening policy to fight inflation will likely drive the economy into recession either later this year or at some point in 2023 .
In the association ’ s monthly release on construction material costs , Basu pointed to construction input prices that are up 21.4 % from a year ago , while nonresidential construction input prices were 21.9 % higher . Overall construction costs rose 2.3 % in May compared to the previous month , according to an ABC report .
Those cost increases largely stemmed from supply-side issues , such as the war in Ukraine , rising energy prices and manufacturing and distribution issues in the supply chain . “ But what the Federal Reserve most directly affects is demand for goods and services , not supply ,” Basu said in his statement .
Dive Insight :
Basu ’ s warning reiterated his earlier prediction this year of a pending recession , when he argued that policy makers had misread the severity and duration of inflationary pressures . Now , he said those missteps could dog contractors for three more years .
“ Based on the historical lag between the performance of the economy and nonresidential construction spending , more difficult times could be ahead for contractors in 2024 or 2025 ,” said Basu . “ Looking at the most recent reading of ABC ’ s Construction Confidence Index , contractors are already seeing momentum slow . The likely exception is public contractors , who will continue to benefit from stepped-up infrastructure spending .”
The triple threat of rising prices , supply chain issues and labor shortages continue to stand in the way of strong demand .
For example , ABC ’ s Construction Backlog Indicator , which measures jobs contractors have booked but haven ’ t started working on yet , increased to nine months in May , its highest level since September 2019 , six months before the onset of the pandemic . The construction industry ’ s otherwise positive outlook largely stems from that
10 DITCHMEN • JUNE 2022