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Ugly construction industry forecast

Architecture News Record says economists expect construction to plunge this year:

The semi-annual forecast, which is compiled in conjunction with top economists, predicts that there will be an average 11.1 percent drop in non-residential construction spending in the first half of 2009. The rate is more than 10 times that of the last six months of 2008, when non-residential construction output was forecasted to dip 1.2 percent, for the first decrease in years.

In the current forecast, which includes data provided by Moody’s, FMI, Global Insight, Reed Business Information and McGraw-Hill Construction, some sectors fare far worse than others. Hotel construction, for example, could post a 20.2 percent loss, the largest in the survey, while power plants and factories might see a 11.2 percent cut.

No sector comes out unscathed, including publicly funded projects. To wit: even spending on firehouses and police stations, which are lumped under the “public safety” category, could shrink 3.5 percent. In contrast, in 2008, that sector was predicted to grow by 5.9 percent.

None of this accounts for the massive stimulus bill Obama is about to sign into law, of course. And we all know construction is just one facet of Caterpillar’s business. Perhaps the best indicator to watch is the Architecture Billings Index, which collapsed last fall.

Historically, architects’ billing numbers have been canaries in the coal mine for builders; if they go down, builders will suffer, too, about nine to 12 months later. And the numbers in this cycle don’t bode well.

The AIA’s Architecture Billings Index, which is compiled from statistics provided by firms, has hovered below 50 for 11 straight months, and anything below 50 represents a billing decrease. In November, the index hit 34.7, the lowest point in its 13-year history.

More on the American Institute of Architects at its Web site
(look for News and Press Releases)

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Tom Mangan posted at 11:18 am February 12th, 2009 |

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