Stable Economy and Pent-up Demand May Spur Construction

Check out this article: "U.S. is Entering the Next Couple of Years with One Distinct Advantage". It's a bit wonky if you don't have an interest or background in economics, but here's the Cliffs Notes version:

• Domestic production of oil is keeping prices stable (in spite of the continued instability in the Middle East).
• Production of domestic energy increases the export/import ratio for the United States, which keeps inflation in check.
• Modest price increases in "all items" (those included in the Consumer Price Index) associated with modest inflation will allow the U.S. Federal Reserve to slowly raise interest rates.
• Compound the increase in the Fed rate (which happens with an improving economy and increases the costs associated with financing projects) AND a shortage in qualified labor due to a decrease in the unemployment rate (which will increase labor costs will lead to higher construction costs), will motivate owners to...
• Pull the trigger on new construction.

There is pent-up demand for capital projects, whether new offices, factories, etc. on the private side or infrastructure on the public side. Corporations have been hoarding cash and issuing bonds for even more cash because of the low interest rate environment. At some point they will have to deploy that cash. And given the need for capital facilities and the specter of rising construction costs, now is a pretty good time to break ground on new projects. Given the increasing ABI reported a few weeks ago, we could be on the cusp of a significant increase in construction activity.