| WASHINGTON, DC -- (BUSINESS WIRE) Hesitant home-buyers, cautious real estate investors, the weaker fiscal standing of state and local government and a
reduced demand for commercial space will pose the biggest challenges to the construction industry during the first
half of 2002. But despite those issues, low interest rates and the potential support of a federal stimulus package
should help construction activity improve during the second half of 2002. The result is that the value of new construction
starts for all of 2002 is projected at $481.0 billion, just slightly below the $481.4 estimated for 2001.
That outlook was presented by Robert Murray, vice president of economic affairs for the Construction Information
Group, a division of The McGraw-Hill Companies (NYSE: MHP - news). Mr. Murray delivered his annual forecast to
industry leaders at F.W. Dodge's Outlook 2002 Executive Conference held at the Capital Hilton in Washington, D.C.
“Against the backdrop of a slowing economy, construction has stayed reasonably healthy for most of 2001, helped by
an offsetting pattern by project type. It's true that commercial building has lost considerable momentum this year,
dampened by weaker business conditions and tighter bank lending standards. However, further expansion was
reported for public works, electric power plants, and schools. In addition, single-family housing for much of 2001 has
stayed strong -- even factoring in a fourth quarter decline, single family housing should be able to match 2000 levels,''
said Mr. Murray.
For all of 2001, Dodge construction starts are projected to climb 2 percent from 2000 levels (reaching $481 billion).
Although it is only modest growth, 2001 will have marked the 10th consecutive year of expansion for construction
activity, when viewed on a current dollar basis.
Prior to September 11th, the economy was already teetering close to recession. Economic growth during the first
quarter of 2001 was reported at 1.3 percent, followed by 0.3 percent in the second quarter.
According to Mr. Murray, “the impact of the events of September 11th will be to deepen and lengthen the economic
slowdown already underway. Substantial layoff announcements in travel-related industries join high technology as
depressed sectors of the economy. The weak job market, along with diminished confidence levels, means that
consumer spending will not provide the same support as in previous years. However, the stage has been set for the
economy to improve as 2002 proceeds, given lower interest rates and the fiscal push coming from the federal
government. This will also have a positive impact on the construction industry.''
Mr. Murray had the following to say about the year ahead for specific areas of the construction industry:
Single-family housing will retreat through early 2002, as home sales and construction are adversely affected by the weak job market and
diminished consumer confidence. When uncertainty eases, homebuyer demand will be able to show a greater response to low mortgage
rates. The full year is projected at 1.175 million units (F.W. Dodge), a 2 percent decline from 2000, which translates into no change in dollar
terms.
Public works construction will advance 2%, as continued expansion for highways and bridges counters a slower pace for other public work
categories.
Electric utilities, following robust growth the previous four years, will begin to settle back as the post-deregulation surge in new power plant
construction recedes.
Income properties will slide an additional 3 percent drop in dollar volume, corresponding with a 5 percent drop in square footage. The steepest
decline is projected for hotels, while stores, warehouses and offices will experience moderate retrenchment. Apartment construction is the
income property type most likely to avoid a decline, since it continues to be viewed favorably as a target by the real estate finance community.
Institutional building will advance 3 percent, due to further expansion for schools combined with a moderate increase for healthcare facilities.
However, reduced contracting is expected for courthouses, churches, amusement-related projects and airport terminals.
Manufacturing building is expected to edge up 2 percent, as its extended four-year decline reaches bottom in early 2002. This category will still
be extremely weak by historical standards, down 35 percent in dollar terms from its most recent peak in 1997.
Robert Murray is vice president, economic affairs for The McGraw-Hill Companies Construction Information Group and has been with the company
since 1981. Mr. Murray is the author of the F.W. Dodge Construction Outlook and also coordinates the five-year industry forecast, the Construction
Market Forecasting Service, which analyzes national and regional trends for building products.
F.W. Dodge, a division of The McGraw-Hill Companies, is the construction industry's project marketplace and the nation's leading source of
construction information since 1891. F.W. Dodge is part of the Construction Information Group that includes a powerful network of brands, comprised
of Sweet's, Engineering News-Record, Design-Build, Architectural Record and construction.com.
This eUpdate posting by: Steve Joyce
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