Charts from a presentation I made to the National Association of Pipe Fabricators (NAPF) Annual Meeting Feb 28, 2014 on the outlook for construction with an emphasis on residential and water & sewer

1. NAPF Annual Meeting
February 28, 2014

2. Outlook for the Economy and
Construction
Presented by: Bernard M. Markstein
Reed U.S. Chief Economist

3. 3

4. 4

5. 5

6. 6

7. Outlook for the Economy and Construction
7
The U.S.
Economy

8. Outlook for the Economy and Construction
8
State of the U.S. Economy
 Economy improving, but weather muddles the numbers.
What is really going on?
 Employment growing, but should be faster
 Inflation moderate (too low?)
 The Fed has started to taper
 Housing/residential construction a positive

9. Outlook for the Economy and Construction
9
Risks to the Economy
 The Fed and interest rates
 Significant cuts in government spending in the near term
 Europe
 European government debt default
 The euro
 Energy (oil) prices

10. Outlook for the Economy and Construction
10
-40
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
3-Month Moving Average, Year-over-Year % Change
Reed Total Starts
(3-Mo MA YoY)
Source: Reed Construction Data

11. Outlook for the Economy and Construction
11
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
1,300
1,400
02 03 04 05 06 07 08 09 10 11 12 13 14 15
Residential Nonresidential Building Heavy Construction
$ Billions
History
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Forecast
Forecast: Construction to improve
Construction Spending and its Components

12. Outlook for the Economy and Construction
12
Residential construction is
recovering, but from a low level
 Single-family housing market is on the mend, but much
further to go before it is back to normal
 Multifamily market has largely recovered, but still some
room for growth

13. Outlook for the Economy and Construction
13
0
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
2,500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Thousands of Units, SAAR
Nation’s long-run (trend)
need for the next decade
Low Estimate
(1.4 million starts per year)
Nation’s long-run (trend)
need for the next decade
High Estimate
(1.8 million starts per year)
Total Housing Starts
(3-Month Moving Average)
Source: U.S. Census Bureau

14. Outlook for the Economy and Construction
14
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Thousands of Units, SAAR
Nation’s long-run (trend)
need for the next decade
Low Estimate
(1.15 million starts per year)
Nation’s long-run (trend)
need for the next decade
High Estimate
(1.45 million starts per year)
Single-Family Housing Starts
(3-Month Moving Average)
Source: U.S. Census Bureau

15. Outlook for the Economy and Construction
15
0
50
100
150
200
250
300
350
400
450
500
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Thousands of Units, SAAR
Nation’s long-run (trend)
need for the next decade
Low Estimate
(250,000 starts per year)
Nation’s long-run (trend)
need for the next decade
High Estimate
(350,000 starts per year)
Multifamily Housing Starts
(3-Month Moving Average)
Source: U.S. Census Bureau

16. Outlook for the Economy and Construction
16
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
Thousands of Units, SAAR
Nation’s long-run (trend)
need for the next decade
High Estimate
(350,000 starts per year)
Nation’s long-run (trend)
need for the next decade
Low Estimate
(250,000 starts per year)
Multifamily Housing Starts
(3-Month Moving Average)
Source: U.S. Census -Bureau

17. Outlook for the Economy and Construction
17
-60
-50
-40
-30
-20
-10
0
10
20
30
40
50
3-Month Moving Average, Year-over-Year % Change
Reed Residential Starts
(3-Mo MA YoY)
Source: Reed Construction Data

18. Outlook for the Economy and Construction
18
0
100
200
300
400
500
600
700
800
02 03 04 05 06 07 08 09 10 11 12 13 14 15
Improvements Single-family Multifamily
$ Billions
Residential Spending Components
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
History Forecast

19. Outlook for the Economy and Construction
19
0
50
100
150
200
250
300
350
400
450
Single-Family Multifamily Improvements
$ Billions
2006 to 2013 ’14 ’15
Residential Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data

20. Outlook for the Economy and Construction
20
Nonresidential
Building
Construction

21. Outlook for the Economy and Construction
21
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
3-Month Moving Average, Year-over-Year % Change
Reed Nonresidential Starts
(3-Mo MA YoY)
Source: Reed Construction Data

22. Outlook for the Economy and Construction
22
275 269
283
302
340
404
438
376
290
284
298 299
317
343
0
50
100
150
200
250
300
350
400
450
500
550
02 03 04 05 06 07 08 09 10 11 12 13 14 15
$ Billions
History
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Forecast
Nonresidential Construction Spending

23. Outlook for the Economy and Construction
23
Heavy engineering

24. Outlook for the Economy and Construction
24
Reed Heavy Engineering Starts
(3-Mo MA YoY)
Source: Reed Construction Data
-40
-30
-20
-10
0
10
20
30
40
50
60
3-Month Moving Average, Year-over-Year % Change

25. Outlook for the Economy and Construction
25
171 171 169
185
208
248
272 274
265
251
272
263
278
300
0
50
100
150
200
250
300
350
400
02 03 04 05 06 07 08 09 10 11 12 13 14 15
$ Billions
History
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Forecast
Heavy Engineering Construction Spending

26. Outlook for the Economy and Construction
26
0
10
20
30
40
50
60
70
80
90
100
110
120
Transportation Communication Power
$ Billions
2006 to 2013 ’14 ’15
Heavy Engineering Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data

27. Outlook for the Economy and Construction
27
0
10
20
30
40
50
60
70
80
90
100
Highway Water and Sewer Conservation
$ Billions
2006 to 2013 ’14 ’15
Heavy Engineering Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data

28. Outlook for the Economy and Construction
28
Regional economic
performance

29. Outlook for the Economy and Construction
29Source: Philadelphia Federal Reserve Bank

30. Outlook for the Economy and Construction
30Source: Philadelphia Federal Reserve Bank

31. Outlook for the Economy and Construction
31
Connect with Reed Construction Data
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 web
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32. Outlook for the Economy and Construction
32
Contact Information and Links
Bernard M. Markstein
 Office: 301-588-5190
 Mobile: 404-952-3381
 b.markstein@reedbusiness.com
 U.S. Forecast and Commentary:
http://www.reedconstructiondata.com/market-
intelligence/articles/
 Blog:
http://www.reedconstructiondata.com/market-
intelligence/bernie-markstein/