Construction Will Drop in 2008 and 2009, Report Predicts

While the construction outlook for 2008 remains the same, 2009 has been revised slightly downward due to an expected slowdown in nonresidential construction, according to a recent report.

The housing and credit markets show signs of stabilizing, though a pause in the economy is likely as inflation continues to threaten, according to an FMI Corporation analysis. The Consumer Confidence Index also fell further in April to 62.3 from 65.9 in March, which has begun to slow down consumer spending.

“Household and business spending has been subdued, and labor markets have softened further. Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters,” says the Federal Open Market Committee, or the Fed.

Even though the main measure of inflation, CPI, at a 1.8 percent increase over the last four months remains on target of the Fed’s 2 percent range, inflation could still pose problems to the nonresidential construction sector. This is due to additional high and rising material costs, such as for steel and copper.

Total construction in 2008 will be down 4 percent and 1 percent in 2009. The decline in 2008 is based upon large decreases in residential construction that won’t be offset by gains in nonresidential and nonbuilding construction. In 2009, the decrease will be caused by a decline in nonresidential construction, the first since 2003.

Employment appears to be holding somewhat steady. In April, the employment rate remained at 5 percent. Employment decreased by 20,000 jobs in April to 146.3 million following job losses that totaled 240,000 in the first three months of the year. Construction employment decreased by 61,000 in April and has fallen by 457,000 since its peak in September 2006.

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