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Research Matters No. 97: 2016 Construction Spending Forecast


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Total construction spending in Alaska will be about $7.3 billion in 2016, down 18% from last year’s $8.9 billion. That drop can be traced to the recent steep decline in oil prices, after several years of very high prices.  Those high oil prices had stimulated construction spending throughout the state economy, especially in the oil and gas sector and in state government. Those are among the findings of the new 2016 Construction Spending Forecast, prepared by Scott Goldsmith and Pamela Cravez of ISER for the Associated General Contractors of Alaska. Other findings include:

• Private industries will spend about $4.5 billion in 2016, down 25% from the previous year. A big part of that decline is in spending by the oil and gas sector, which is expected to drop from a record high of $4.2 billion in 2015 to about $3.1 billion this year. 

• Spending by basic industries that benefit from lower oil prices—tourism, seafood, air cargo, and timber—will be up 39% in 2016, to about $104 million. The mining industry is expected to spend about the same this year as last—$180 million—despite weakness in metal prices.

• Utilities will spend about $459 million for projects in 2016. That’s down about a third from the 2015 level, mostly because several large electricity generation and expansion projects have been completed.  Spending for hospitals and other health-care facilities will drop nearly 20%—also because a number of large projects are now complete.  

 • Overall spending by the public sectors will be about $2.8 billion in 2016, a drop of 6% from the previous year. But spending for national defense projects will be up 27%, to about $552 million, led by large projects at Eielson Air Force Base and the first phase of a project adding interceptor missiles at Fort Greely. 

 • Spending for highway and road projects will hold at the same level as in the previous year, around $700 million.

• Spending for education projects, largely funded by the state government, will be about $400 million in 2016—down 13% from last year. Two new rural schools were completed in 2015. There will be little construction on University of Alaska campuses in 2016, but replacement of the electric power plant on the Fairbanks campus will begin this year.

Download the report, 2016 Alaska Construction Spending Forecast (PDF, 1.6MB). If you have questions, get in touch with Scott Goldsmith, professor emeritus of economics, at osgoldsmith@uaa.alaska.edu

 

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