Boston, MA -- (SBWIRE) -- 04/30/2014 -- In line with our long held view that the residential construction sector would drive the recovery in the US construction industry, we believe 2014 will see another positive year for growth in the sector. Real industry value is expected to expand by 1.8%, driven primarily by a 2.0% expansion in residential and non-residential building. However, over the medium term, the recovery will naturally slow, and while we expect an expansion in infrastructure industry value, following a steep contraction in 2013, upside potential is yet to be completely factored in, and therefore we currently expect construction industry real growth rates to slow over 2015-2023, averaging 0.5% y-o-y.

Key Developments

- The residential construction sector continues to expand. As expected, data has been and will continue to be mixed. However, overall the trend is for continued recovery in the sector. Housing starts, homebuilder confidence and permits are all trending higher, although starts have struggled to sustain levels above the 1mn mark. While the sector has come a long way since 2011, there is considerable room for further expansion. Housing starts remain considerably below the peak of 2,273,000 in January 2006 and we are beginning to see a decline in sales inventory of existing homes, indicating demand and supply are being rebalanced. Consequently, we forecast residential construction to continue to positively contribute to the overall construction industry value.
- Power and transmission infrastructure industry value will stabilise in 2014, following a steep drop in investment in 2013 resulting from the expiration of broad based tax incentives for renewable projects. We see some potential for value creation over the medium term from retrofitting and safety upgrades to nuclear power plants, as well as major transmission projects to hook up new renewable supply. However, much will depend on new legislation guiding existing coal-fired power plants, due in mid-2014, to indicate the future of electricity sector investments in the US.
- Oil and gas pipelines will remain the outperformer in the energy & utilities infrastructure segment. With crude and natural gas production continuing to expand, and growing capacity issues and safety concerns over carrying crude by rail, we expect investment into new pipelines to be necessary.

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