Construction went on to enter this year, stamped by a 7% surge in nominal value added and a 6% rise in nominal gross output as compared to 2022. 1 As of the third quarter of this year, average construction spending went over to maintain a steady path upward.2 But if these trends in real GDP data continue from last year, it is indeed significant to note that most of the topline growth is likely being pushed by price inflation vis-à-vis volume. Apart from this, the grappling with the inflation that’s ongoing, the sector is facing quite a volatility in material prices as well as increasing labor costs. Another major issue is the present and continuous shortage when it comes to skilled labor, which continues to hamper the sector. Apart from this, the high interest rates and tighter lending standards are also affecting construction activity.
It is well to be noted that looking ahead to 2024, there could indeed be a boost to construction that’s associated with manufacturing, transportation infrastructure, as well as clean energy infrastructure, as funds from three major pieces of legislation passed throughout 2021 and 2022, which were the Infrastructure Investment and Jobs Act- IIJA, the Inflation Reduction Act- IRA, and the Creating Helpful Incentives to Produce Semiconductors- CHIPS Act, which are indeed expected to flow through the industry. 3 As such, construction confidence is indeed high, with the Associated Builders and Contractors- ABC identifying anticipations and pushing for an increase in profit margins and also staffing levels, especially in the first half of 2024.4
As E&C firms go on to plan for 2024, these are certain 5 major areas that may go on to help them capitalize when it comes to the projected industry growth and also tackle the challenges that are unforeseen-
- Balance sustainability & efficiency
- Leverage digitalization & embrace generative AI
- Varied effects of present economic uncertainty
- Be more strategic & manage cost volatility
- Adapt to new work & work norms
Looking into the future: Agility, along with adaptability founded on digital transformation, can be key to industry competitiveness
The E&C industry has gone on to demonstrate strong resilience in the face of continuous pressure as well as economic fluctuations. As one transitions to 2024, the increasing focus on sustainability and efficiency, even in the face of economic uncertainty, stresses the importance of agility along with adaptability. E&C companies can go on to be nimble across the continued adoption of new technologies, analytical methods, as well as the engagement of a broader workforce. Digital transformation can go on to help E&C companies come up with new synergies while at the same time improving efficiency, decreasing emissions and waste, cutting costs, coming up with new value streams, and also boosting talent and program management. Making utmost use of cutting-edge technologies like generative AI can go on to provide a competitive advantage to E&C firms throughout 2024. Moreover, E&C companies can go on to compete on both cost as well as revenue by going on to access government incentives offered by the IRA, IIJA funding streams likely to hit the market in 2024, or even both. The fact is that E&C firms should go on to continue to embrace change, not just as a response to external pressures but due to a strategic imperative to better progress in an uncertain macroeconomic environment.
In 2024, E&C companies may go on to add the following to their strategy playbook so as to navigate uncertainty, push for competitiveness, and also take advantage of the opportunity that is at hand:
- Stress on the economics of sustainable construction with the use of high-performance building materials as well as energy-efficient systems.
- Continue to fund a digital foundation with BIM as well as robotics, and also explore applications of emerging technologies like generative AI to elevate efficiency.
- Make use of data-driven insights so as to improve decision-making and safeguard financial performance.
- Invest across workforce development by way of apprenticeships as well as training programs, and also across automation tools, safety of workers, and some expanded DEI representation when it comes to hiring.
REFERENCES
1. Deloitte analysis of data from U.S. Bureau of Economic Analysis.
View in Article – https://www2.deloitte.com/us/en/insights/industry/engineering-and-construction/engineering-and-construction-industry-outlook.html#endnote-sup-1
2. Deloitte analysis of data from U.S. Census Bureau.
View in Article – https://www2.deloitte.com/us/en/insights/industry/engineering-and-construction/engineering-and-construction-industry-outlook.html#endnote-sup-2
3. Heather Boushey, “The economics of public investment crowding in private investment, – https://www.whitehouse.gov/briefing-room/blog/2023/08/16/the-economics-of-public-investment-crowding-in-private-investment/” The White House, August 16, 2023.
View in Article – https://www2.deloitte.com/us/en/insights/industry/engineering-and-construction/engineering-and-construction-industry-outlook.html#endnote-sup-3
4. Associated Builders and Contractors, “ABC’s construction backlog indicator steady in August, contractors remain confident, – https://www.abc.org/News-Media/News-Releases/abcs-construction-backlog-indicator-steady-in-august-contractors-remain-confident” news release, September 12, 2023.
View in Article – https://www2.deloitte.com/us/en/insights/industry/engineering-and-construction/engineering-and-construction-industry-outlook.html#endnote-sup-4
