A May 16 report from Dodge Construction Network shows a prolonged debt ceiling breach stretching into July would cause a 14% drop in 2023 construction starts and a further 9% drop in 2024, according to Construction Dive. That would reflect a 30% decline from the market’s peak in 2022.
If Congress resolves the crisis within a week or so after the breach, Dodge Construction Network predicts it would cause a 3% drop in construction starts in 2023 and a 1% rebound in 2024.
“Considering the potential impact on businesses across the sector, it’s important for business leaders to consider all scenarios, regardless of whether it’s good news or bad,” said Richard Branch, chief economist for Dodge Construction Network.
The Treasury Department has said the federal government will hit its mandated debt limit as soon as June 1. By law, Congress must vote to raise the threshold so the government can continue borrowing money to pay its bills. If the government defaults on its debts, it likely would cause a global economic crisis.
There currently is no agreement regarding a debt hike; House Republicans are pushing for a broader resolution to cut overall government spending, and Democrats are lobbying for a “clean increase” before addressing a larger spending framework. Still, the consensus is Congress will avoid a default before the June deadline.
If Congress avoids a default, the Dodge Construction Network report forecasts construction starts will grow 2% in 2023 and another 6% in 2024.