2023 Economic Forecast: Markets Are Mixed for Year Ahead

Alisa Zevin, ENR

Inflation, rising interest rates and a possible global recession continue to top the list of forecasters’ concerns for the coming year.

“The key issue facing the economy now is inflation, [which is] determining its path as we move forward,” says Richard Branch, chief economist at Dodge Construction Network. While he says the Federal Reserve was “a little late to the party,” a reference that it kept interest rates too low despite signs of post-COVID-19 economic recovery, the central bank now is aggressively raising them to reign in further inflation impacts. Should this be successful, Dodge expects rates to steady in the first quarter. “That should allow the economy to stabilize and start to recover in the back half of 2023,” Branch says. His forecast expects the U.S. to avoid a “technical” recession, but in many construction sectors, “it is going to feel recessionary,” he says.

Jay Bowman, a principal of industry management consultant FMI, expresses a similar sentiment. “Old economy” sectors such as hospitality and entertainment are likely to slow in the coming year, he says, while the “new economy”—represented by data centers, manufacturing plants and warehouses—won’t be tied to the overall economic outlook.

Dodge expects construction starts to reach $1.086 billion by year end, and stay roughly flat in 2023— falling just 0.2% to $1.083 billion. FMI, which forecasts put-in-place construction, estimates a 7.8% total construction hike in 2022, with a 1.3% decline in 2023. “I don’t think this is another great recession,” says Bowman. “I’ll take flat over down any day of the week.”

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