Volume 44, Issue 5 - May 2009

Industry Outlook

Forecasts Show 2009 Construction Starts Down 15 Percent, Spending Down 11 Percent 

There’s no good news yet for commercial construction. McGraw-Hill’s 2009 Construction Outlook Spring Update reported that commercial building in 2009 is expected to drop 27 percent—a steeper drop than the 17-percent slide reported last year. The tight lending environment has made it difficult to obtain project financing, leading to more projects being deferred or cancelled. While all commercial works will register declines in 2009, the most severe retrenchment anticipated is for hotel construction.

Meanwhile, nonresidential construction spending is expected to decrease by 11 percent in 2009 in inflation-adjusted terms, followed by an additional 5-percent drop in 2010, according to the American Institute of Architects’ (AIA) semi-annual Consensus Construction Forecast. AIA shows that commercial projects, including office buildings and retail establishments, are expected to see the most significant decrease in activity. 

Other findings of the McGraw-Hill forecast include: 

• New construction starts for 2009 are estimated at $463.1 billion, down 15 percent, but cushioned by support provided by the recently enacted American Recovery and Reinvestment Act of 2009; 
• Institutional building in 2009 will retreat 6 percent, as the weak financial environment takes its toll on educational and healthcare facilities. The stimulus funding will likely provide a lift to military facilities and energy upgrades for federal buildings, moderating this year’s overall institutional decline; and
• Residential building in 2009 will drop an additional 31 percent, continuing the downward trend that’s been underway since 2006. Steps taken in early 2009 to address the foreclosure problem should help to ease the rate of descent for housing as 2009 progresses.

March 2009 Producer Price Index Decreases

The United States Department of Labor’s Bureau of Labor Statistics has released its March 2009 producer price index (ppi). The March ppi for flat glass stands at 116.5, a drop from the February 2009 ppi of 117.4. 

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