Marcum Releases Q1 2023 Report

The Marcum Commercial Construction Index for the first quarter of 2023 reports that the construction industry retains momentum despite still-elevated inflation and ongoing labor shortages.  Despite that momentum, the combination of high interest rates and tightening credit conditions, along with a dour economic outlook, means that construction activity could slow in the latter part of 2023.

Manufacturing-related construction continued to outpace the nonresidential segment. Residential construction volumes faded during the first quarter, though some parts of the segment have fared better than others. The industry continued to add workers at a faster pace than the broader economy during the first quarter. Labor scarcity, however, continues to push wages, and therefore construction costs, higher.

Elevated borrowing costs and tightening credit conditions represent the strongest headwinds for the construction industry. Certain construction markets, like single-family housing, have already buckled. While contractors participating on private and public megaprojects are positioned to remain busy during the months ahead, those not in a position to participate on those types of projects may experience declining backlogs for much of the next two years.