According to Bill Toal, chief economist for the Portland Cement Association, the U.S. construction industry can expect an overall decline of 6.3 percent in activity next year due to the economic downturn. Still, “by historical contrast this would put construction spending back to slightly above 1998 levels, which were record levels of activity,” he said.
“We expect a 10 percent decline in private, nonresidential construction spending next year after a 5.4 percent drop this year,” Toal said. On the residential side, increased unemployment and stock market volatility will hit the consumer causing home sales to decline by 8.5 percent next year after increasing by 1.2 percent this year.
Toal and David Seiders, chief economist for the National Association of Home Builders, said it won't take long for the construction industry to recover. Toal predicts the construction industry overall will see a 4.2 percent increase by 2003 and Seiders forecasts recovery for residential markets to begin as early as the first quarter of 2002.
Forecasts have been revised down further because of those events. For the overall economy, Toal revised his spring forecast of 1.7 percent growth in economic activity down to 1 percent growth for 2001. He revised his overall economic growth rate predictions for next year to 1.8 percent down from his prior forecast of 2.7 percent. In contrast to the declines in residential and nonresidential construction, public construction was predicted to grow slightly, albeit at a much slower rate than it has for the past two years.
Seiders said NAHB adjusted its housing market index following Sept. 11. About 10 days after the attacks, housing production fell by about 5 percent, he said. In a supplemental survey of homebuilders, 56 percent of respondents said new home sales had declined even further in the wake of the attacks. Figures released a few hours after Seiders' speech showed the NAHB monthly index dropped 8 points from 56 to 48.
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