Construction to Decline Through 2009, Forecasters Say

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Non-residential construction activity will experience a modest decline through the rest of this year, then dip more sharply in 2009, according to the latest American Institute of Architects (AIA) semi-annual Consensus Construction forecast, a survey of some of the nations leading construction forecasters.

The forecasters are calling for a 1.2% decline in inflation-adjusted activity this year, followed by a projected 6.7% decline in 2009.

In the commercial/industrial sector, the consensus is for the greatest drops in retail and office construction activity. Hotel and industrial facility construction is expected to rise.

In the institutional sector, health care, education, amusement/recreation and public safety construction are forecast to increase, while construction in the religious category falls by nearly 12%.

"The more pessimistic forecasts this round stem from the lack of growth in the overall economy, the ripple effect from the faltering housing market and the anxiety in credit markets leading to a restriction in lending for all types of construction projects," said Kermit Baker, AIA chief economist. "The one bit of good news is that this contraction in activity is likely to be considerably milder than the construction recessions of the early 1990's and earlier this decade."

Read the full report here.