Highlights
- US construction starts fell 28.2% year-on-year and 19.9% year-to-date in Q3 2020. Non-residential building experienced the steepest decline, as the pandemic has weighed on the prospects of sectors such as hospitality, retail, and office working. The decline in civil engineering construction was exacerbated by some mega projects in 2019 falling out of the calculation. The decline in residential homebuilding has been driven by construction of apartments, with the single-family segment holding steady.
- The pace of the recovery has slowed markedly, driven by the expiry of fiscal stimulus, rising infection rates, and election uncertainty. Our baseline forecast assumes that Congress will eventually pass a new fiscal aid package, but even if Biden wins the election and delivers fiscal aid in 2021, the economy would stall in Q4 2020. We see the economy contracting 3.5% in 2020 and expect a relatively soft rebound of 3.7% in 2021.
- US construction activity is forecast to decline more deeply in 2020 than during the global financial crisis of 2008-09. Non-residential construction will see the sharpest falls amid weak business investment. Residential activity will hold up relatively well, particularly within single-family construction. Looking ahead, we forecast a rebound in growth from 2021 but it will be slow and unevenly distributed.
- Total construction starts in Canada in Q3 declined 43.9% year-on-year and 28.6% year-to-date, with declines in all three headline segments. Restricted construction earlier in the year has largely resumed, but strong activity in Q3 2019 has fallen out of the annual calculation.
- Headline construction starts are forecast to decline by nearly 30% in 2020, following a contraction last year as well. In the recovery phase, new construction activity is expected to grow at a double-digit pace through 2023, but it is not expected to regain its pre-pandemic high (in 2018) until 2023.
