Last Updated on March 27, 2023 by Construction Digest
During a recent webinar hosted by the Associated General Contractors of America (AGC), Chief Economist Ken Simonson shared his optimistic outlook for the US economy. Simonson cited strong job openings, wage growth, and robust investment into equipment, IT, and plant construction as factors that will help the country avoid a recession this year.
Specifically, he predicted “huge growth” in the manufacturing sector, especially in carbon capture and electric vehicle (EV) battery plants.
Manufacturing spending in the US increased by 5.9% in January and has remained up about 53.6% since January 2022, according to an analysis by the Associated Builders and Contractors.
Major projects in the sector, such as the $4 billion Panasonic EV battery plant in De Soto, Kansas, and the $3.5 billion Ford EV battery plant in Marshall, Michigan, among others, have contributed to the growth.
Simonson noted that manufacturing has been on an upswing, with immense fabs going up outside of Phoenix, Austin, and Columbus, Ohio, and announcements about similarly large auto assembly or electric vehicle battery plants coming in almost every week.
Simonson’s optimism is shared by other economists, who have revised their forecasts for the start date of a US recession, according to a survey by the National Association for Business Economics. Half of economists had previously predicted a downturn would start during the first quarter of 2023.
However, Simonson acknowledged that rising materials, labor, and financing costs could still hinder the overall economic recovery. He cited rent slipping in some hot markets like Boise, Phoenix, and Denver as an example.
As a result, many developers could face challenges covering the rising costs of construction and financing with higher rents. This could lead to a slowdown in apartment construction and overall commercial categories such as warehouse, retail, office, and lodging.
Despite the potential challenges, Simonson remains optimistic that the US economy will continue to thrive in the coming months. “There is quite a risk of recession, but my expectation is that the economic recovery will continue,” he said.
Overall, Simonson’s positive outlook on the US economy serves as a beacon of hope amidst a challenging economic climate.