A stronger job market and low mortgage-lending rates will continue to drive growth in the US housing market as well as stimulate demand in housing-related industries in the near term, according to the latest First Research Industry growth forecasts by INFORUM — the Interindustry Forecasting Project at the University of Maryland. INFORUM forecasts offer First Research customers macroeconomic as well as industry-level perspectives, along with compounded annual growth rates for 2016-20 for more than 500 industry profiles.
US economic growth will continue to stem from the consumer and private business sectors, with little contribution from government spending. Growth in US exports is likely to continue to be hindered by the strength of the dollar, which makes US goods more expensive in foreign markets. Slower growth in Europe and China will also put downward pressure on demand for US exports, which is likely to create further challenges for the US manufacturing sector.
However, strong US job growth and rising wages should help reduce household debt and stimulate strong consumer spending for automobiles and other durable goods, and somewhat lower spending for nondurables and services. Inflation-adjusted consumer spending is forecast to increase 2.6% in 2016 and rise 2.4% in both 2017 and 2018.
A stronger job market, along with loosening credit, and low mortgage-lending rates are expected to drive 9% growth in US housing spending in 2016. Since the recovery of the US housing market, growth has been strongest in the multifamily segment, but demand is showing signs of shifting toward the single-family market. Weak oil prices have worked against overall investments in nonresidential construction, but spending growth should advance in some specific markets including commercial and health care.
The improved fortunes of the US housing sector should also drive demand in several other industries, including housing construction contractors and subcontractors, home centers, building materials dealers, and furniture and home furnishings stores.
The effects of expanding US health coverage will drive increased health care spending as more consumers exercise their new benefits. Overall, US health care sector revenue is forecast to rise 6% in 2016. Key areas of growth will include hospitals, outpatient surgical centers, nursing homes, and assisted-living facilities.
Other key pockets of US growth are forecast to be in the high-tech, finance, and wholesale trade sectors, as well as industries that benefit from increased consumer spending, including child care and social assistance. After a serious rough spell for the oil patch, oil and gas prices have been begun to stabilize, setting the stage for growth. Revenues for oil and gas exploration, drilling, and field services are all expected to experience double-digit compounded annual growth through 2020. Also in the energy sector, wind- and solar-powered energy consumption is expected to rise 9% and 8%, respectively, through the forecast period.
Among the forecast laggard industries, tobacco wafts to the bottom as it continues to fall out of favor with consumers, and falling defense spending will challenge segments of the aerospace products and parts industry. Environmental concerns will further reduce US coal consumption, but an increase in exports could temper those effects and prop up production levels.
In terms of potential threats to US economic growth, INFORUM puts a potential recession at the top of the list. Some US economists have estimated the probability of a 2016 recession to be about 15%-20%, but that was before Brexit — Britain’s vote to leave the European Union. The coming split between Britain and the EU, and Scotland’s potentially leaving the UK, could spark a significant economic downturn. This, along with sluggish growth in the EU, China, and Latin America, may increase the chances of a recession in the US. Political gridlock in Washington and an ongoing litany of global crises also contribute to downside risk for the US economy.
Customers of D&B First Research can find the latest growth rates from INFORUM in the Industry Forecast section in any industry profile. First Research also provides insight into business challenges, trends, and opportunities in 500-plus industries. Industry profiles are also available on First Research’s sister product, D&B Hoover’s.
James Bryant is an industry editor for Dun & Bradstreet. Based in Austin, Texas, he writes about issues affecting the global manufacturing sector. He’s been the company’s specialist on the auto industry for 15 years.