The Construction Industry Progress Fund (CIPF) and the Associated General Contractors (AGC) of Alaska released the annual Alaska Construction Spending Forecast this week. The report is funded by Northrim Bank and written by Scott Goldsmith and Pamela Cravez of the University of Alaska’s Institute of Social and Economic Research (ISER).
This year, construction spending is predicted to be about 3 percent lower than 2014. The total is expected to be about $8.5 million for the year. Private spending is expected to be down in all areas, except for mining, while public spending is expected to increase slightly. Even with the drop in oil prices and state budget shortfall, state government construction spending will not likely see a negative impact this year or next. A record high $2.3 billion was appropriated from the general fund in FY2013 and that money is continuing to be spent on projects that will fuel spending this year.
Goldsmith and Cravez note that predicting the spending levels for the oil and gas industry is tricky because plans often change due to many factors. A healthy increase in 2015 was predicted in the last quarter of 2014, but those plans are likely to change due to the continued low oil price. The low price of oil means that the producers have less cash available for investment in new projects. The good news is that the industry tends to make investment decisions on conservative, long run oil prices. The current drop will have less of an impact moving forward.
Alaska’s economy has slowed over the past three years. Job growth has continued, but very slowly and the population growth has stalled. There are now more people leaving Alaska than moving here on an annual basis. Private investment will slow because many are looking to determine how long the economic slowdown will last.
As in many industries, the construction industry will wait out this period of low oil prices and work to find a balance for new projects as well as projects already in the pipeline.
For the full report can be viewed at our ‘Resources’ page.