Volume 37, Issue 11, November 2002



Economist Predicts Mixed Outlook for 2002 Year-End Construction

Construction economist Bill Toal, formerly with the Portland Cement Association (PCA), recently provided construction industry professionals with an industry forecast for the remainder of the year during the seventh annual CMD/CSI chief executive officer breakfast.

The construction industry may see a 1.6-percent drop for the year.

According to Toal’s report, which used data from the PCA, the industry may see a 1.6-percent decrease in total construction for the year, with an expected 1.4-percent increase next year.

Toal also noted that while some sectors remain weak, the economy appears to be improving, showing such signs as an increase in industrial production and record-low inflation and interest rates. According to the report, low interest rates have led to strong consumer spending, including “robust” housing starts. And while residential construction currently is stronger than expected, Toal predicted a “small dip” before the end of the year.

Although industrial production had declined in early 2002, it is now showing signs of improvement. The corporate office market, however, is still dropping “as there is the impression that things may be worse than previously thought in the corporate sector due to recent financial scandals.” 

In addition, Toal provided revised residential construction forecast numbers. Housing starts were predicted to drop below 1.5 million from 1.6 million in 2001, but are now expected to remain at 1.55 million starts for 2002. Likewise, industrial and commercial construction have dropped, and Toal suggested this was a “red flag” for this market segment with a 10.8-percent forecast drop by the end of the year. For 2003, though, industrial and commercial construction is expected to begin recovery with a 5-percent increase.

In terms of airport and school construction, Toal expects these areas to remain strong through the year’s last two quarters, as will public works. 

Cost for Workers’ Compensation Insurance is Expected to Remain High
The August 25, 2002, issue of National Underwriter magazine reported that insurance executives attending the Workers’ Compensation Education Conference see “no immediate end” to high prices for workers’ compensation insurance.

According to James Roberts, president of the specialty workers’ compensation division of American International Group located in Parsippany, N.J., “barring unforeseen events, the hard market pricing conditions should continue through 2003,” reported National Underwriter. Roberts also said prices are up 15 to 20 percent this year.

Other negative factors for insurers include declining investments and bond yields and the rise in medical costs, said National Underwriter. 


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