Commercial Construction Level Still Falls Short of Meaningful Recovery

The Dodge Momentum Index, a McGraw-Hill component of planning for new construction, has indicated that commercial construction is showing flickering signs of new life, but seems not to have gained substantial footing after a late 2007 peak index of near 190, and a bottom of 75 as 2011 ended. The year 2000 is the index base of 100.

Since commercial construction includes development of shopping malls, stores, warehouses and office buildings, it represents the overall futuristic outlook of domestic U.S. economic expectations and that sector’s willingness to intensify investment in all aspects of commercial expansion.

While hesitatingly lifting itself off the floor in early 2012, the specter of the year-end fiscal cliff, and its comprehensive solution, has amplified into a debt ceiling confrontation, magnified by sequestration, negatively impacting commercial and military expenditures, if implemented.

Early economic indicators are signaling cutbacks in domestic U.S. hiring, as well as greater emphasis on bottom line productivity through technological embrace in the back office as well as on the industrial shop floor. Also of concern to store-based retailers is the greater shift to on-line purchasing, which is now in the throes of a yet undetermined surge.

My interviews with many in the retail arena, which has been at the heart of America’s world-leading consumer consumption section, has elicited overwhelming concern with dictums emanating from the federal government. These are universally regarded as destructive to business growth. Mentioned most often are “Obamacare” and “oppressive financial regulations, which force additional paperwork on small businesses. These are considered especially frustrating, when companies are forced to hire “paper shufflers,” while cutting back on “productive” personnel.

Also coming in for concern by retailers are the reinstatement of the 2% annual employee withholding tax, which will discourage many shoppers from discretionary purchases. My interviewees were firm in their conviction that such negative emanations from Washington, D.C. will likely lead to additional government action, in which climatological initiatives and issues such as gun control, immigration policies, and other non-economic social behavior debates, will act to hamper improvement in both employment as well as consumer spending.

According to such overwhelming, but anecdotal remarks, these seem to indicate that 2013 commercial construction expansion will become a lagging indicator as the new year progresses.

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