ABC Forecasts Downturn in 2009 Construction Activity

While the industry experienced a mixed bag in 2008, do not expect the same story in 2009,” said ABC Chief Economist Anirban Basu.“For more than a year, economists have been discussing how weak the overall economy has been.The ongoing credit crunch began in earnest in August 2007 and the U.S. economy shrank during last year’s fourth quarter,” said Basu. “Because commercial construction typically lags the overall economy by one to two years, the weakness that has pummeled other segments of the nation’s economy has not been as apparent in commercial construction performance.

“However, that is about to change in 2009,” added Basu. “One of the most telling signs that we will see a downturn in commercial and industrial construction activity is the dramatic fall of the Architecture Billings Index (ABI), produced by the American Institute of Architects. In October, the ABI rating reached a historic low not seen since the rating system was established in 1995.

“While nonresidential construction employment was down 4.7 percent on a year-over-year basis in October, this level of job loss pales in comparison to what is likely to emerge over the next twelve months,” added Basu.

“ABC expects that the reversal in industry fortunes will be increasingly manifested in the 2009 and 2010 data.  It is worth noting that producer prices also will begin to decline more forcefully in the months ahead due to the deflation in key commodities, including copper, steel and oil. However, this will help accelerate the sector’s eventual recovery.”

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