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2009 construction forecast revised

The Construction Outlook, a quarterly construction market forecast developed by FMI’s Research Services Group, indicates construction for 2008 remains much the same, but the outlook for 2009 has been revised down slightly because a downturn in nonresidential construction usually lags a slow down in the general economy. Nevertheless, water supply and sewage and waste disposal construction are expected to increase.

Recently released economic indicators are somewhat mixed. Housing, credit tightening, consumer spending, and inflation continue to hinder the economy. While the general economy begins to stabilize somewhat, nonresidential construction is expected to falter late in 2008 and into 2009.

"The Fed continues cutting rates to stimulate the economy, but inflation is becoming a threat and a pause is likely," said Heather Jones, construction economist for FMI’s Research Services.

The Construction Outlook also reports that water is an important concern in our nation. Aging infrastructure, population growth, and net migration are fueling demand for new and replacement construction, especially in the Sunbelt and Rustbelt regions. Water supply and sewage and waste disposal construction will increase by 2 percent and 3 percent, respectively, in 2008 and by 2 percent and 4 percent in 2009 despite a decrease in state and federal revenues.

Total construction in 2008 and 2009 will be down 4 percent and 1 percent, respectively, based upon large decreases in residential construction that will not be offset by gains in nonresidential and nonbuilding construction. The decline in 2009 will be driven by a decrease in nonresidential construction for the first time since 2003.

Historical information in FMI’s Construction Outlook is based on building permits and construction put in place data as provided by the U.S. Commerce Department. Forecasts are based on econometric and demographic relationships developed by FMI, on information from specific projects gathered from trade resources, and on FMI’s analysis and interpretation of current and expected social and economic conditions.

FMI provides management consulting to the building and construction industry, including contractors, architects, and engineers.