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Griselda Bisono, Moody’s Investors Service,
provides an outlook on
the US construction and building materials sector.
I
n November 2018, Moody’s revised its outlook
for the building materials sector to stable from
positive, reflecting its expectations of slower organic
operating income growth over the next 18 months.
This prediction is due to diminishing demand in private
construction. The company expects organic operating
income growth for the building materials companies
that it rates to decelerate in 2019 to an annualised
pace below 7%, following four years of strong growth.
The forecast is at the high end of the -3% to +7%
operating income growth range for a stable outlook
and incorporates more modest, but still growing
construction spending.
Private residential construction
Private residential construction growth is decelerating,
with several key factors pointing to a slowdown. Rising
mortgage rates and a decline in housing affordability
have led to a spike in new home inventory, supporting
Moody’s stable homebuilding outlook. It expects that
single-family housing will start to grow by 4.5% in
2018 and 3.2% in 2019, compared with between 9%
and 10% average growth from 2015 to 2017. The
inventory of new, unsold homes reached 7 months for
the first time since 2011.
Multifamily rental housing construction has
experienced weak growth since 2016, which is in
large part due to reduced capital availability. Multifamily
housing starts are expected to grow by 7.6% in 2018
and 2.4% in 2019. While that is an improvement from
the 11% decline during 2017, those figures are still
weak by historical standards. The overall residential
construction sector is also facing labour constraints
and increasing raw material costs. It is expected
that private residential housing demand will remain
stable, supported by solid wage and job growth, low
unemployment, and millennials’ growing need for
housing.
Private non-residential construction
Private non-residential construction spending will
also see slower growth in 2019. Non‑residential
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