corporate mind-set as to where to in- vest. I anticipate that large numbers of smaller industrial projects to up- date or expand existing facilities will move forward, as opposed to new facilities. That makes a lot of sense for companies that were once considering new offshore plants but are now stay- ing where they are. We watch rates closely. [In tED’s January economic roundtable] I called two rate increases in 2017. That still looks likely, counting the one we already had. There is a 50/50 chance for two more.
Kent: In the extensive work lead- ing up to our PwC Engineering and Construction Trends 2017 report, we found increases in several domestic construction segments, along with some that show year-over-year de- cline (water/public safety/power). Nevertheless, we believe there are still many challenges for domestic engi- neering and construction companies (contracting/labor availability), as well as uncertainty related to infra- structure spending. For oil and gas specifically, we de- veloped a predictive regression model based on 20 years of capital expendi- ture and oil price data (when oil prices go up, oil and gas capital expenditure follows closely). Results indicated an increase in capital expenditure spend- ing in oil and gas from last year—but a slow level of growth—likely not get- ting back to the historical highs. We have not done an explicit fore- cast of all domestic construction seg- ments. However, based on historical data, we see segments such as com- mercial, office, and residential as key segments to watch. Overall, then, if construction jobs and employment levels are indica- tive of the expected trend (and we believe it is), it appears that the do- mestic construction market will con- tinue with solid growth. However, domestic construction firms may seek to develop new operating models to
compensate for less availability of skilled project managers and electri- cians. I mention this as it represents a potential “limiter” to future growth (perhaps not this year, but it’s still a concern). Beyond the remainder of this year, the big question is how future U.S. infrastructure spending will play out —specifically which regions/states and what projects. For the firms I have spoken with, there is a level of optimism. ; Sullivan is president of JSA. He can be reached at email@example.com.
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