U.S. real GDP slowed to 1.6% in 2016, the lowest growth rate since 2011. However, the outlook for construction spending in 2017 continues to be positive for all market sectors. The AIA’s semi-annual Consensus Construction Forecast, a survey of the nation’s leading construction forecasters, is projecting nearly 6% growth in nonresidential construction spending in 2017, just below the pace of growth for 2016.
“Looking ahead in 2017, there is cause for continued optimism for the North American E&C industry,” said Chris Daum, CEO of FMI, a management consulting and investment banking firm that works exclusively with the engineering and construction industry. “However, beyond a sound economy and other traditional demand drivers, there is growing hype for a boom market in infrastructure spending, which to date is nothing more than speculation based on the new presidential administration. Our caution to clients is similar to the old Wall Street bromide, ‘buy the rumor and sell the news.’ Only in this case, we should all prepare for the possibility, but invest behind the facts.”
Lighting industry performance in 2016
NEMA’s Lighting System Shipment Index, a measure of demand for lighting equipment, decreased by 9.7% in 3Q 2016 compared to 3Q 2015 and 4.7% decrease compared to last quarter (2Q 2016).
The decrease was driven by all components of the index, which includes luminaires, emergency lighting, ballasts and lamps, all of which posted year-over-year decreases.
Traditional lamp technologies in particular fared poorly. Since 2014, the Linear Fluorescent Lamp Index has been on a downward trend, and that trend continued in 3Q 2016. The index for T8 lamps, which account for 63% of the lamp market, decreased on a year-over-year basis by 27.3% in 3Q 2016 compared to 3Q 2015. T5 and T8 shipments also continued to decline, decreasing by 27.7% and 27.3% respectively on a year-over-year basis.
NEMA/BIS has added tubular linear LED replacement lamp (TLED) shipments to the market penetration graph to begin tracking their impact on the market. When more historical data is available, TLED shipments will be added to the index. In 3Q 2016, T-LEDs accounted for 12.8% of fluorescent lamp shipments. T5 lamps claim a 9.4% share of the 3Q 2016 market and T12 lamps 14.8%.
High intensity discharge (HID) lamp shipments, as measured by NEMA’s HID indexes, continued to decline in the third quarter of 2016. Sodium vapor lamp shipments fell 15.2% compared to the same period last year, shipments of mercury vapor lamps decreased by 11%, and shipments of metal halide lamps decreased by 25.4% year-over-year.
Metal halide lamps accounted for 60.3% of the HID market in 3Q 2016, while sodium vapor and mercury vapor account for 35.6% and 4.2% respectively.
LED A-line lamps posted another strong showing in 2015Q3, surging 237.2% during the quarter on a year-over-year basis. Halogen A-line lamps posted a year-over-year increase of 33%. In contrast, incandescent A-line lamps decreased by 31.5% while compact fluorescents lamps (CFL) dropped 28%. Compared to Q2 2015, LED shipments rose 17.2%, while halogen A-lines increased 4.6%. CFL shipments saw a quarter-to-quarter decrease of 16.3% and incandescent A-line lamp shipments decreased 16.5%.
The market for LED A-line lamps continues to grow, accounting for 32.4% of the A-line market in third quarter 2016, and posting a 124.2% increase in shipments compared to 3Q 2015. They posted a 65.1% quarter-over-quarter increase in the third quarter of 2016 compared to the previous quarter.
Halogen, Incandescent, and CFLs all posted a quarter-to-quarter decrease, 7.5%, 17.2%, and 12.8%, respectively. Incandescent lamp shipments (largely 15W and 25W) showed a 5.6% increase in 3Q 2016 compared to 3Q 2015 while halogen and CFLs posted an 11% and 53.9% decrease for the same period.
Halogen A-line lamps accounted for 44.5% of the consumer lamp market in 3Q 2016. CFLs captured 13.2% of the 3Q 2016 consumer lamp market and incandescents 10%.
Looking ahead to 2017: Manufacturer survey
Lighting manufacturers surveyed by ZING Communications, Inc., publisher of the LightNOW website and newsletter, suggest a positive industry outlook for 2017. The survey was sent to 1,600 manufacturers with 48 respondents (filtered to identify companies manufacturing nonresidential lighting products for sale in North America), a 3% response. Among the respondents, 84% said they manufacture luminaires, 59% controls, 27% light sources and/or ballasts/drivers, and 4.5% other products. Further, 93% manufacture specification-grade products and 41% non-spec-grade.
Respondents that manufacture both conventional and LED luminaires reported an average 71% of their unit sales in 2016 were LED-based. Among all luminaire manufacturers, 86% said they sell LED luminaires packaged with onboard controls and networked control systems.
On average, respondents believe nonresidential construction and upgrade market activity will increase in 2017, and along with it their company’s lighting sales (both dollar volume and shipped units).
Respondents also expect their sales of indoor lighting, outdoor lighting, lighting controls, tunable-white LED lighting, and networked intelligent lighting controls will increase in 2017. (Respondents whose companies don’t manufacture one or more of these categories were instructed to check “NA” for not applicable.)
2016 construction spending
Growth in construction spending in 2016 continued to outpace the U.S. economy. Estimated total put-in-place construction spending—actual numbers and not seasonally adjusted—grew 4.5% in 2016. Based on projected year-end numbers at the Commerce Department, total put-in-place construction spending reached $1.162 trillion in 2016.
Residential construction saw the biggest gains in 2016, with a projected 5.1% increase in spending put-in-place, while nonresidential construction spending grew by a projected 4.1%. Private nonresidential grew 7.8% while public nonresidential declined 1%.
Looking at individual nonresidential building markets, the office and commercial markets led growth with the biggest gains, with increases in put-in-place construction spending of 24.9% and 10.9%, respectively.
Click here to see the data.
Current construction indicators
The Architecture Billings Index (ABI) concluded 2016 in positive terrain, with the December reading capping off three straight months of growth in design billings.
As a leading economic indicator of construction activity, the ABI reflects the approximate 9- to 12-month lead time between architecture billings and construction spending.
The American Institute of Architects (AIA) reported the December ABI score was 55.9, up sharply from 50.6 in the previous month. This score reflects the largest increase in design services in 2016 (any score above 50 indicates an increase in billings). The new projects inquiry index was 57.2, down from a reading of 59.5 the previous month.
Regional averages were Midwest (54.4), Northeast (54.0), South (53.8) and West (48.8). By sector: commercial / industrial (54.3), institutional (53.3), mixed practice (51.9) and multifamily residential (50.6).
The regional and sector categories are calculated as a 3-month moving average, whereas the national index, design contracts and inquiries are monthly numbers.
“The sharp upturn in design activity as we wind down the year is certainly encouraging,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “This bodes well for the design and construction sector as we enter the new year. However, December is an atypical month for interpreting trends, so the coming months will tell us a lot more about conditions that the industry is likely to see in 2017.”
The electrical industry expressed optimism about current economic conditions during 10 months of 2016. The National Electrical Manufacturers Association’s (NEMA) Electroindustry Business Conditions Index (EBCI) for current conditions in North America stayed at or above a score of 50 for every month except February and September. Following a strong score of 57.9 in November, December ended the year on an even higher note with an EBCI of 66.7.
The share of those reporting worse conditions in December mirrored November’s report at 11%. The major movement in the index came about due to the shift from “unchanged,” which registered at 63% in November, to “better conditions,” reported at 23% last month. In December, both “unchanged” and “better” came in at 44%.
AIA Consensus Forecast for 2017
For 2017, the American Institute of Architects’ (AIA) semi-annual Consensus Construction Forecast is projecting growth in overall nonresidential building spending of almost 6%, just below the pace of growth for 2016.
The commercial construction sectors – retail, office, and hotel – will continue to lead the building recovery, while industrial construction is projected to see almost no increase this year. For 2018, the institutional construction sectors will generate much of the growth, particularly the large education structures market.
The American Institute of Architects’ (AIA) semi-annual Consensus Construction Forecast, a survey of the nation’s leading construction forecasters, is calculated as an average of all forecasts provided by panelists that submit forecasts for each of the covered building categories. The AIA Consensus Construction Forecast Panel is conducted twice a year with the leading nonresidential construction forecasters in the United States including, Dodge Data & Analytics, Wells Fargo Securities, IHS-Global Insight, Moody’s economy.com, CMD Group, Associated Builders & Contractors and FMI. The purpose of the Consensus Construction Forecast Panel is to project business conditions in the construction industry over the coming 12 to 18 months. The Consensus Construction Forecast Panel has been conducted for 18 years.
Click here to see each of the panelist’s projections.