The building materials sector is projected to “outperform” over the next 12 to 18 months in the United States, according to a report by Moody’s Investors Service. Robust public infrastructure spending and continued momentum in commercial spending are expected to offset the tough domestic housing market, according to Moody’s.
While Moody’s projects public infrastructure spending will increase by 10.6% and commercial nonresidential construction activity will increase by 7.9% in 2023, it forecasts a 15% decline in new-construction spending, an 8% decline in repair and remodel activity, and an 11% decline in private residential construction. The declines in residential construction will be a result of the sharp increase in mortgage rates and other inflationary pressures making homeownership and remodeling less affordable, according to Moody’s.
Lower residential construction activity is expected to rebound with slow growth in 2024 “as the U.S. suffers from a housing shortage and consumers readjust expectations.” Moody’s believes the low supply-high demand market for single-family homes will continue to provide “stable underlying growth for home builders for years, despite current weakness.”
Building material companies in the U.S. are projected to experience “solid revenue growth” and maintain profitability in 2023 due to the strength of the commercial and infrastructure markets. Commercial activity will benefit from reshoring activity, continued investment in 5G, warehousing, and green energy, according to Moody’s. Infrastructure spending will benefit from years of underinvestment and a “congested transportation system in desperate need of repairs,” according to Moody’s.
