Economic Forecast Points to Mild Slowdown on the Horizon

Glass Magazine
September 13, 2018
COMMERCIAL, RETAIL, FABRICATION : GLASSBUILD AMERICA 2018

“We see some headwinds coming,” said economist Connor Lokar of ITR Economics during his forecast presentation at the 13th annual Glazing Executives Forum, held Sept. 12, during GlassBuild America: The Glass, Window & Door Expo in Las Vegas. “We expect it to be a speed bump—a pause in growth. This will not be the Great Recession.”

Lokar said that key economic indicators point to a slowdown in the U.S. economy beginning in the fourth quarter of 2018 through at least the first half of 2019. But, he projects that the economy will be back to growth again in 2020.

“This is a slight pullback. It will allow you to catch your breath. You’ve been desperately trying to keep up for the last 18-24 months,” Lokar said.  

The nonresidential construction sector, which lags behind the U.S. economy, is unlikely to feel the slowdown until closer to 2020, he said. “Commercial markets might be even better next year than they were this year. 2019 is not as worrisome for you. But there will be whispers of that slower growth rate at this time next year when you start planning for 2020,” Lokar said.

Office building and other construction in the private sector are on the upswing, he said. Educational spending, which has been slower, is poised to grow faster, while hospitals and healthcare, which had been stronger, will likely see growth rates slowing next year, he said. The one segment to be wary of is multifamily.

“Multifamily does not look good. This is a market you need to be worried about,” Lokar said. “Multifamily is dangerously saturated at the national level. … It has been throwing distress signals for the last two years. Vacancy rates are going up. We are overbuilding. … It is in the midst of a mild correction.”

While Lokar said the expected slowdown in 2019 and 2020 is likely to be more mild, he pointed to a number of other concerns company owners should watch. “Tariffs could be a threat to business cycle growth, if [the administration] goes forward with proposed measures,” he said. Companies should also prepare for rising industry rates. “As far as financing needs are considered, it’s not going to get any easier,” he said. And the labor shortage will continue to be an issue. “Retention is paramount,” he said.