Construction industry recovery forecast for 2011


The nation’s construction industry, virtually on life support during the economic downturn, will begin a slow recovery next year, according to a forecast reported in the Wall Street Journal.

Next year, the value of new projects that start construction is expected to climb to $445.5 billion, an 8% rise from this year when that figure hit a post-recession low, according to the closely watched McGraw-Hill Construction forecast.

New development of single-family houses, apartment buildings and commercial properties is expected to increase. But there will be less building of new highways, bridges and other public works as federal stimulus money dries up, according to the forecast.

Even with an increase next year, construction activity will still be far off the boom-year peak it hit in 2006 when there were $689.3 billion in construction starts, according to McGraw-Hill.

McGraw-Hill last year initially forecasted a gain of 11% for 2010, but that projection proved to be overly optimistic. Construction starts are estimated to decline 2% from 2009 as a recovery in the housing industry stalled in the middle of the year, credit remained sparse and municipal budget deficits widened.

“State and local governments saw their fiscal health erode to a greater extent than previously thought,” said Robert Murray, vice president of economic affairs at McGraw-Hill Construction, part of New York-based McGraw-Hill Cos.

McGraw-Hill expects the U.S. economy will grow 2.5% in 2011. “The economy will continue to struggle in 2011 although avoid another recession,” Mr. Murray said.

Among specific sectors, single-family housing should see the strongest rebound in 2011, with $126.7 billion in construction starts, a 27% boost, according to the forecast. But that projection assumes mortgage rates remain low, job growth improves and a resolution is found to the foreclosure documentation mess. The single-family estimate is 60% below the peak in 2005, underscoring how far builders have curtailed construction following the housing boom.

New construction of multifamily housing is expected to rise 24% to $23.6 billion next year, extending gains from 2010 as a growing number of renters enter the market amid the housing crisis. A 1% decline is expected for public-works construction, which should come in at $122.3 billion as a lack of federal stimulus money and budget woes of state and local governments put a lid on new projects.

Meantime, commercial buildings—which includes offices, stores, hotels and warehouses—will improve with a 16% gain to $44.9 billion. But that comes after falling 17% in 2010 and 43% in 2009. In 2010, construction starts hit a 50-year low.

McGraw-Hill projects that construction starts of manufacturing buildings will increase 9% as the drop in value of the U.S. dollar increases demand for U.S. goods. Read More.


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