Steel Market Update is a member of an association connected to the construction industry called HARDI. HARDI stands for Heating, Air-conditioning & Refrigeration Distributors International. HARDI and The Institute for Trend Research (ITR), an economic forecasting company, work together to gather economic data to provide a forecast to the HARDI members located in the United States and Canada. The information shared in our newsletter is only part of a much larger package seen by participating HARDI member companies.
ITR looks at data using a 3 month and 12 month moving average to determine where business is within the growth cycle. Our last issue covered the general economic overview as well as construction forecasts for the Northeast, Mid-Atlantic, and Southeastern Region based on data as of the end of November 2016. Today we will cover the Great Lakes, Central, Southwestern and Western regions.
The Great Lakes regions saw housing permits grow 18.6 percent from year ago levels in the 12 months through November. The growth rate is slowing in the region, especially in Michigan and Ohio. ITR expects a plateau in early 2017 before rising again in 2018. Home prices in the region have outpaced the national average in much of the region and still accelerating, except in West Virginia. Michigan home prices were up 5.9 percent in Q3 followed by Indiana and Kentucky up 6.2 percent each and Ohio up 5.6 percent. ITR expects 2017 permits growth to increase 6.1 percent after a 17.1 increase in 2016. Permits are expected to decline in the second half of 2018 to finish the year up 0.3 percent.
Nonresidential construction was up 46.2 percent in 2016 and is expected to grow by 24.6 percent in 2017. Commercial construction and medical construction, both showing growth rates of more than 100 percent from year ago levels, are expected to offer opportunities for HARDI members. Nonresidential construction is expected to slow in 2018 and be at the 5.8 percent growth level.
Housing permits gained 13.6 percent in the 12 months through November 2016 and are now decelerating. Permits are expected to pick up by mid-2017 before slowing again in 2018. Growth accelerated in Iowa and Colorado but North Dakota permits were down 40.8 percent year-over-year. Wyoming may be an emerging area of opportunity in 2017, says ITR. Home prices accelerated in Q3 through most of the region. The ITR forecast is 12.5 percent growth for 2016, 13.8 percent for 2017 and 1.5 percent in 2018.
Nonresidential construction showed a 2.8 percent gain year-over-year as of the end of November. Construction is expected to have a mild contraction by mid-2017 and then accelerate into 2018. South Dakota and Nebraska are expected to have strong construction activity in the first half of 2017. Retail and Medical construction are showing acceleration and are ITRs picks for HARDI member activity. The nonresidential forecast is 4.3 percent growth for 2017 followed by a stronger year in 2018 at 16.4 percent.
The Southwest saw housing permits contract in 2016, ending the year down 4.3 percent. The contraction is expected to persist in early 2017 before rising through 2018. Texas is the weakest region in the area in Phase D, recession and Oklahoma will likely follow suit in 2017. Home prices accelerated in Texas and Oklahoma while the rest of the region is growing at a slower pace. ITR expects 2017 to see 12.2 percent growth followed by 4.9 percent permit growth in 2018.
Nonresidential construction in the Southwest increased by 5.5 percent in the 12 months through November and increased 5.7 percent for 2016. Construction is expected to decline in the early part of 2017, rise into mid-2018 and contract again near the end of 2018. Retail construction is not likely to offer many opportunities but commercial construction was up 19.2 percent at the end of November and, although slowing, may be an avenue for HARDI members to pursue. Louisiana is in recovery but Oklahoma and Texas offer the most possibilities. The ITR forecast suggests 23.2 percent growth for 2017 followed by contraction to -5.9 percent in 2018.
Housing construction permits in the Western region had a 7.1 percent increase year-over-year in 2016. ITR revised its forecast upward due to an earlier than anticipated acceleration in growth and now expects permits to rise into the second of half of 2018. Other than Hawaii, permit growth exceeded year ago levels in the region. Slower growth is expected in most of the region including Idaho, Nevada and Oregon. Utah is showing acceleration and will likely have opportunities for HARDI members. Home prices rose faster than the national average in most of the region and are accelerating in Washington, Idaho and Utah. The ITR forecast calls for 13.7 percent growth in 2017, dropping to 2.0 percent in 2018.
Nonresidential construction grew by only 0.6 percent in 2016 but may have some opportunities in Oregon in the first half of 2017. Most of the area is transitioning to slower growth for 2017 with a cyclical low in mid-2017. California and Montana are areas of particular weakness. Education and medical construction are likely to have the most opportunities in the Western region. The ITR forecast was adjusted downward to 5.7 percent for 2017, and 11.4 percent for 2018.
SMU NOTE: Dr. Alan Beaulieu (photo above) will once again entertain and enlighten our Steel Summit attendees in Atlanta later this year. Information about the 7th Steel Summit conference can be found on our website: www.SteelMarketUpdate.com
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