Construction spending saw a boom in 2023 with growth primarily supported by US fiscal policy. With shifting inflation and the 2024 presidential election fast approaching, how will fiscal policy influence the sector this year?

Oxford Economics Lead US Economist Bernard Yaros joins Yahoo Finance Live to weigh in on what could change in 2024.

As far as construction spending's relationship with fiscal policy goes, Yaros does not predict major risks in the near-future, noting “the economy hasn’t been relying on this area for the resilient growth that we’ve gotten over this past year.”

Yaros does predict possible changes "later down the road" over possible changes in tax credits and generative AI tailwinds.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Eyek Ntekim.

Video Transcript

RACHELLE AKUFFO: And Bernard, when you see this like sort of growth really being reliant or because of being really propelled by fiscal policy, are there some risks that come with that? Perhaps, you know, we know that with these sort of buildings comes a lot of growth in GDP. Is there a danger though that it won't pay off?

BERNARD YAROS: So it's-- a lot of the spending, it's supporting growth in business investment in structures, which is not-- it is not the end-all, be-all when it comes to growth. That's really to the consumer. But it's-- you know, we still think that this has legs for this year. This isn't-- the economy hasn't been relying on this area for this-- you know, for the resilient growth that we've gone over the past year.

And I think there is-- the risks are probably later down the road if we have a change in Congress and a change in the Oval Office where there could be some adjustments made to these tax credits. At least for this next year, I mean, there's a lot of reason to believe that this is still gonna continue. These tax credits are not going anywhere.

And when it comes to semiconductor, I mean, there's still that impetus among businesses to reassure the production of sensitive electronics given the trauma we've all had with the supply chain issues during the pandemic.

And then I would also say that generative AI, that's also a potential tailwind that could show up more fully this year, especially as manufacturers address the growing needs of the data center industry.

So the risks are potentially for later on when you could have some changes in the political makeup. There's a lot of question about the Inflation Reduction Act Tax Credits. But that's more of a question, I'd say, for the middle of the decade or later on in the decade, not so much for the outlook this year.