Construction Trends During Election Years

Predicting the economic behavior of any industry is typically a tall task. However, forecasting the construction industry’s economic fluctuations during an election year is a much less daunting undertaking. With plenty of data to analyze, certain patterns are obvious in the months approaching an election and the months after a President is voted into office.

Election Influence On Construction Dynamics

The construction industry is particularly tethered to the political climate due to several factors such as tax policy, interest rates, regulation changes, and policies surrounding immigration and labor laws. Historical trends reveal that election cycles often bring a mix of uncertainty and optimism, affecting investments, project timelines, and economic forecasts within the construction sector. Understanding these trends can help developers effectively navigate the challenges in the construction landscape and capitalize on the opportunities presented by election cycles.

Preelection Caution: Analyzing The Slowdown

In the months leading up to an election, it is common to observe a slowdown in construction spending. Developers and investors tend to adopt a wait-and-see approach, postponing major investments until after the election. This trend is driven by the desire to avoid committing resources in an uncertain political environment.

For example, in 2012, total construction spending in the United States exhibited a significant dip from August to October, according to data from the U.S. Census Bureau. The same data set shows a similar trend in both the 2016 and the 2020 elections. However, all 2020 data must be taken with a grain of salt due to the slowdown ushered in by the COVID-19 pandemic.

Postelection Surge: Opportunities Unlocked

Conversely, the period following an election often witnesses a surge in construction activity. Once the political landscape becomes clearer, pent-up demand and deferred projects are typically released, leading to an increase in construction spending.

This increase in construction spending is particularly noticeable when the election results are perceived as favorable for business and economic growth. For example, in December 2016, total construction spending in the U.S. reached $1.181 trillion, a significant rise from previous months and years. According to the Federal Reserve Economic Data, this increase was driven by heightened confidence in the economic policies anticipated from the incoming Trump administration, which included promises of deregulation and infrastructure investment.

Similarly, following the 2008 election, the Obama administration implemented the American Recovery and Reinvestment Act (ARRA), which significantly boosted the construction sector through increased infrastructure spending and economic stimulus.

The data shows an uptick in construction projects can almost always be expected during the postelection period; however, the type of projects that will see the most spending is highly dependent on the candidate’s campaign promises.