The upcoming construction sector earnings results are expected to benefit from economic growth, the labor market, higher demand, tighter inventories and rising home prices. These positive factors are reflected in the improving estimates picture for the sector ahead of the major earnings releases starting next week.
After the solid 3.1% economic growth in the in the July-September quarter, the world’s largest economy is expected to have advanced 3.3% in the fourth quarter of 2017, per the latest Atlanta Fed’s real-time Q4 GDP growth estimate. This solid upbeat projection holds particularly true when one of the nation’s key economic drivers, i.e. construction activity, is gradually strengthening its footprint accompanied by a declining unemployment rate (4.1% in December 2017).
Construction Sector at a Glance
Overall, 2017 was a great year for the construction sector. The dynamic performance of the sector has been majorly buoyed by strong homebuilding activities and a rebounding U.S. economy. Spending on construction was up 4.2% year over year in the first 11 months of 2017, per the latest U.S. Census Bureau report. Although spending on government projects declined 3.4% during the period, homebuilding spending increased 6.6%.
The sector has seen a strong year primarily on the back of robust gains from homebuilding investments. Although challenges in the housing industry persist in the form of low supply levels/limited listings, adverse impact of hurricanes as well as rising prices, factors like strong consumer confidence, favorable demographics, pent-up demand, job gains and income growth are outweighing the headwinds facing the sector.
The latest data from the National Association of Realtors reveals that existing home sales for the month of November increased 5.6% to 5.81 million units in November to hit an 11-year high. Existing home sales, which account for 90% of home sales in the United States, surged 3.8% year over year in November.
Meanwhile, the confidence level among the nation’s homebuilders ended 2017 on a high note as the housing market index (HMI) was at 74 in December. This marks the highest reading since 1999.
