HARDI/ITR Quarterly Forecast January 2018, Part 1

Written by Sandy Williams

Prepare for growth in the U.S. economy this year, says ITR Economics. The latest HARDI/ITR quarterly forecast predicts accelerated industrial production through the first half of the year and possible slowing in the second half.

Steel Market Update is a member of an association connected to the construction industry called HARDI, the Heating, Air-conditioning & Refrigeration Distributors International. HARDI and ITR Economics, 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. Today’s issue will cover the general economic overview, as well as construction forecasts for the Northeast, Mid-Atlantic and Southeastern Regions.

Economic Overview

Industrial production in the 12 months through November was up 1.5 percent from the same period in 2016. The ITR Leading Indicator and the U.S. Leading Indicator bode well for first-half growth, says ITR, but slowing in the second half will lead into a “brief and mild macroeconomic recession in 2019.”

The retail sector will benefit from higher disposable personal income in 2018, at least through the second quarter before conditions tighten.

“HARDI members should feel optimistic about the new year, as you did at this time in 2017,” writes ITR Economics. “The notable difference being that at this time last year the U.S. economy found itself closer to the beginning of the runway of acceleration while in early 2018 we are closer to the end.”

In its steel summary, ITR said it expects quarterly steel scrap prices, which correlate strongly with galvanized steel prices, to have mild growth through early 2018 before sliding in the remainder of the year. As world industrial production decelerates in 2018, so will steel consumption, preventing steel prices from getting much higher this year, particularly in the second half of 2018.


Housing permits are expected to rise through 2018 and begin declining into the second half of 2019. Conditions will then improve through at least the end of 2020, says ITR. Permit authorizations declined in New York due to tax abatement in the state, pulling statistics for the Northeast region down. Once construction normalizes in New York, the region will be better aligned with the rest of the nation. The pace of home price growth is accelerating in every state in the Northeast except for Vermont at 2.0 percent growth. ITR expects construction to rise in 2018 and 2020, but will not reach the levels seen in 2015. Housing construction is expected to grow 6.5 percent in 2018, followed by contraction of -2.6 percent in 2019. Building will accelerate in 2020 for a growth rate of 14.6 percent.

Nonresidential construction spending in the region moved into Phase B, accelerating growth since the last quarterly report. “Construction will expand during 2018, increasing 6.2 percent from 2017,” writes ITR. “2019 will present less opportunities than 2018, declining 1.8 percent on a year-over-year basis. 2020 will be a better year than 2019, increasing 15.6 percent from the 2019 level and reaching a record high.”


Permit authorizations increased 8.6 percent year over year in the 12 months through November, but are expected to decline from now through the second half of 2019, says ITR. In 2020, permits will start to rise again and continue through the end of 2020. Single-family authorizations are currently slower than multi-family, a trend that will continue in the near term. Accelerating permit growth in Maryland, New Jersey and New York City are contributing to accelerating growth for the overall region. Rising home prices are supporting acceleration of permit authorizations. ITR expressed concern regarding the high foreclosure rate in the Mid-Atlantic and suggests that it could threaten home prices in the region. Delaware, New Jersey and Maryland have the highest foreclosure rates in the U.S. The residential construction forecast calls for contraction, a -0.8 growth rate in 2018, followed by -1.0 percent growth in 2019 during the mild recession. Housing construction will jump 11.6 percent in 2020.

Nonresidential spending in November was 0.8 percent below the prior year and transitioned to Phase D recession since ITR’s last report. The decline is expected to be short-lived and nonresidential construction will then grow through mid-2019. In second-half 2019, a decline will take hold and continue through most of 2020, predicts ITR. New York City construction has helped to offset slowing growth elsewhere in the region. The nonresidential construction forecast for the coming three years is: 9.0 percent in 2018, 3.8 percent in 2019 and -17.4 percent in 2020.


Housing permits are rising at an accelerating pace in North Carolina, Virginia, Tennessee and South Carolina. Permit growth has plateaued in Mississippi and is slowing in Florida and Georgia. Only Alabama is below its year-ago level, according to ITR. Single-family permits are outpacing multi-family permits. Home prices grew across the region, with Florida, Georgia, South Carolina and Tennessee above the national average. Higher prices should support new construction, but remodeling opportunities will also be available in the South for HARDI members. Residential construction is forecast at -1.2 percent growth in 2018, 1.6 percent in 2019 and 9.0 percent in 2020.

Nonresidential spending is in a general decline for the region. Spending is expected to reach an imminent low and then accelerate into mid-2019, before declining again throughout most of 2020. ITR forecasts nonresidential construction growth of 13.9 percent in 2018, 4.7 percent in 2019 and -2.6 in 2020.

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