Construction Market Forecast: Nonresidential Construction Will Plummet, Begin 3+ Years of Contraction

Construction industry management consulting and investment banking firm FMI has released its Construction Outlook: First Quarter 2009 Report, available free online as a PDF document here.

The outlook forecasts nonresidential construction will plummet and begin at least three years of contraction. The bottom, in terms of both dollar volume and percent decline, will not be until 2010. Residential construction is not expected to recover until 2011.

Report highlights include:

• Project delays are four times the normal rate and are currently at 20% (up from three times in 3Q08).
• Project cancellations are five times the normal rate and are currently at 10% (doubled from 3Q08).
• An important bill to the outlook for construction is the America’s Better Classrooms Act, which provides $25 billion for 0% interest school construction bonds.
• The stimulus bill is not going to single-handedly save the construction industry.

Amidst all the economic doom and gloom, there are a few bright spots:

• Inflation has remained under control so far.
• Prices are down for most materials.
• The stimulus bill will help to mitigate some loss.
• There is still a large amount of construction being put in place.

Click here to get Construction Outlook: First Quarter 2009 Report.

“The construction industry is not only dependent on the stimulus bill. The general economy is a main driver for both residential and nonresidential construction. Real GDP decreased 6.2% in the fourth quarter … Consensus Forecasts predict that GDP will decline 2.1% for 2009 and then turnaround and increase 2.0% in 2010. We believe that these estimates are optimistic …” – Heather Jones, Construction Economist for FMI

Craig DiLouie

See Full Bio