Engineering and construction M&A update: H1-2017

Engineering and construction industry overview and indicators

Baker Tilly Capital, LLC’s engineering and construction M&A update provides an overview of the U.S. engineering and construction sector, including recent performance and M&A trends.

In the first quarter of 2017 (Q1-2017), construction spending totaled $259.5 billion which represented a 13.1 percent drop from the prior quarter and a 1.6 percent increase from the same period in 2016. Engineering and construction firms should anticipate modest growth through the remainder of 2017 and into 2018 according to the forecast released by the American Institute of Architects (AIA).

Spending in the non-residential sector is expected to finish 2017 at just under 4 percent growth from the prior year. However, the commercial and industrial sector is poised to finish the year strong with an expected spending increase of 8.8 percent for the year according to the AIA.

Aggregate construction spending so far in 2017 has been less than expected compared to the optimistic outlook for the industry entering the year given the anticipated fiscal policies that many hoped would bolster industry growth. On an annualized basis, the U.S. economy has grown approximately 2 percent through the first half of 2017 (H1-2017). The infrastructure spending plan for $1 trillion has been delayed. 

Other concerns over the growth of the engineering and construction industry include a cyclical future slowdown of the U.S. economy and rising material costs. While most economic experts do not fully anticipate a broad recession, the consistent growth the economy has experienced over the last several years is expected to eventually taper off. Additionally, the increase in demand for construction materials has driven the rise in prices of those materials.

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