MCC Construction Zone A majority of financial sources — including Morgan Stanley, S&P Global and The Wall Street Journal — place the probability of a recession within the next 12 to 24 months at 50% or less” (Construction Dive. Real Estate pros ask: Are we headed into a recession? Mary Salmonsen. June 9, 2022). These statements were made before the Fed increased interest rates. “Associated Builders and Contractors Chief Economist Anirban Basu said the Federal Reserve’s tightening policy to fight inflation will likely drive the economy into recession either later this year or at some point in 2023. Based on the historical lag between the performance of the economy and nonresidential construction spending, more difficult times could be ahead for contractors in 2024 or 2025. Looking at the most recent reading of ABC’s Construction Confidence Index, contractors are already seeing momentum slow. The likely exception is public contractors, who will continue to benefit from stepped-up infrastructure spending.” (Construction Dive. Recession watch: ABC economist sees ‘difficult times’ through 2025. Sebastian Obando. June 16, 2022)
“The triple threat of rising prices, supply chain issues and labor shortages continue to stand in the way of strong demand. For example, ABC’s Construction Backlog Indicator, which measures jobs contractors have booked but haven’t started working on yet, increased to nine months in May, its highest level since September 2019, six months before the onset of the pandemic. The construction industry’s otherwise positive outlook largely stems from that healthy backlog, according to Dodge Data & Analytics. But growing odds of a recession are dampening that positive outlook (Construction Dive. Recession watch: ABC economist sees ‘difficult times’ through 2025. Sebastian Obando. June 16, 2022). Time will tell. My thoughts, prepare for the worst and pray for the best.
About the Author David E. Gibbs, CPA, CCIFP, CRE, MBA, is the partner-in-charge of the firm’s Real Estate Services Group. He works with real estate professionals in a wide range of sectors including commercial, industrial, and residential. Clients benefit from David’s profound knowledge of the unique tax elections for real estate professionals. David holds the well-respected Certified Construction Industry Financial Professional (CCIFP) designation from the Institute of Certified Construction Industry Financial Professionals (ICCIFP), as well as the elite Counselors of Real Estate (CRE) designation. He can be contacted at 610.828.1900 or David.Gibbs@McCarthy.CPA.
Disclaimer: This article is for informational purposes only and should not be relied upon for tax or accounting advice. We strongly advise you to seek professional assistance concerning your specific issue(s).
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