Future US construction growth could get an additional boost if, as announced, the new US administration invests heavily in infrastructure improvements.
- The robust performance is expected to continue in 2017
- Payments take between 30-60 days on average
- Still many foreclosures in some states
In 2016 the US construction industry continued its rebound that started in 2012, with value added sector growth up 5.3%, and another 2% increase is expected in 2017. Residential construction is forecast to remain robust through 2019. Foreclosures have decreased 11% over the past 12 months, however, some states (especially in New England) still recorded increased foreclosures. Non-residential construction is expected to expand 5.6% in 2017, with hotels, offices, and amusement/recreation venues expected to drive the expansion. The unemployment rate in the construction sector declined to almost 5%, just slightly above the national unemployment rate.
US construction growth in 2017 could get an additional boost if, as announced, the new US administration invests heavily in infrastructure improvements. After the US Federal Reserve raised interest rates in December 2016 further increases are expected in 2017, which could result in accelerated buying activity in the housing segment.
Banks are principally willing to lend to the construction industry, but only for viable and promising projects. As the commercial and residential development markets strengthen, the construction sector´s financing climate is improving. However increasing salaries, healthcare costs for staff and miscellaneous expenses continue to weigh on the already tight margins of many US construction businesses.
Payments in the US construction industry still take 30-60 days on average, while 90 day terms are not uncommon. Over the last two years payment experience in the construction sector has been rather good, and the overall number of late payment notifications we received in 2016 levelled off. US construction insolvencies decreased in 2016, and are expected to level off in 2017. Small businesses in the industry are generally still paying later and have higher bankruptcy rates and delinquent debt than other industries.
Due to the positive development, we have continued to increase our risk appetite for the industry over the past few years. But caution is still advised, especially with smaller construction businesses. When available, financial statements are to be reviewed annually with supplemental soft credit information reviewed more frequently. Trading experience will be used to gain a better comfort level in gauging the relationship between our customers and their buyers. Reduction or withdrawal of cover is considered if the buyer shows significantly worsening results, including losses, heavy debt levels, problems with working capital, cash flow or liquidity or deteriorating payment trends.
