While confidence in the market remains high overall, recent events have started to erode some of that confidence.

Stocks have had their weakest showing since the 1970s, while inflation is high and consumer spending is slowing. Logistics issues remain. The Federal Reserve, for its part, has aggressively raised interest rates to bring prices back down. Regulators will be watching economic indicators for the next quarter closely for signs of a recession on the horizon.

At the beginning of this year, we would have said that a recession in the next 12 months is possible but not likely. Now we would say that it is more likely but not inevitable. Inflation remains a key issue that has impacted everyone. It has surprised regulators both in scale and tenacity and has prompted the Fed to take ever more drastic steps to rein it in. This has in turn raised alarm bells: the last time the Fed had a similar job was in the 1970s when it brought inflation down by deliberately causing a recession. It will take time for their efforts to bear fruit, however, so we forecast that a recession is unlikely for at least the next 8 months. After that, however, it is unclear.

Commodities continue to see an uptick in pricing further exacerbated by the war in Ukraine. Petrochemicals and asphalt use oil and its derivatives as key inputs, while metals and glass are made in furnaces that run on oil and natural gas. These goods have all seen steep price increases over the last year. The logistics industry is also a contributing factor- the US was short 80,000 truck drivers at the end of last year. This has translated into higher costs and longer lead times. In some cases, we have seen workers unable to begin construction because deliveries arrive weeks late.

Even so, there are myriad reasons to be optimistic. 2022 is well on track to be a return to form in most markets, albeit with some notable exceptions. Things like remote work will probably be here to stay, but so will in-person work. We will still need offices, although nationwide occupancy remains below 50%.
People are again moving back into city centers as events begin anew and restaurants reopen. Large cities across the US lifted their remaining pandemic restrictions early this year. Experts believe that the coronavirus has shifted to being endemic – as contagious and risky as the flu, barring new variants.

Confidence in the market remains high, although there is still potential for new variants to emerge. For those in the industry, we continue to sound a note of caution on volatility, as markets regularly change on an almost daily basis. The timing of any project will have an impact on materials costs for at least the next few months. Overall, the market outlook continues to be positive. Many markets have seen a decline in volume over the last 12 months, but this is no reason for alarm. Things remain somewhat volatile – sanctions on Russia have driven gas prices up, for example – but as pre-pandemic trends take over, contractors are less likely to be caught off-guard by sudden changes in the market.


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