NECA TransmissionsNotes from the front lines of the electrical contracting industry

'Tis the Season

Posted on Nov 21, 2008 by John M Grau

No. not that season. At least not quite yet.

It’s the season for 2009 construction economic forecasts. The reports are coming across my desk, and they don’t paint a pretty picture.

I mainly rely on the annual forecast produced by McGraw-Hill Construction. Other groups that try to crystal ball the construction economy are the U.S. Dept of Commerce, the Homebuilders association, the General Contractors, the Architects and the Portland Cement Association.

I look most closely at the forecasts for non-residential markets because that’s where the bulk of NECA members earn their bread and butter. Those markets had been doing well the last few years — until now. Overall, non-residential building is predicted to decline by about 10 percent next year.

The biggest decreases are predicted for office buildings, hotels, retail stores and manufacturing facilities. The more stable markets are power, transportation, and health care and educational buildings.

One ominous note in all these forecasts is that they present a best-case scenario. In other words, they assume that the government efforts to unfreeze credit markets and stimulate the economy will work. It they don’t, all bets are off.

An economist at a recent meeting of the Construction Users Roundtable predicts that after the current downturn runs its course, there will be a steep increase in construction and that workforce shortages will be greater than ever. That’s a warning to us that we can’t stop hiring and training apprentices even in a down economy.

So my read on all this is that contractors will be burning through their backlog in 2009. The last half of next year and a good part of 2010 may be tough times. Bidding for projects will come back in 2010, with construction starts rebounding sharply in 2011.

This all presumes, of course, that you believe economists know what they’re talking about.

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NECA Transmissions is a collaborative effort from CEO John Grau and NECA staff to provide insight and feedback on key issues from the front lines of the electrical contracting industry.

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