FMI Outlook: Industry Should Prepare for Another Year of Decline in Nonresidential Construction

The construction sector is struggling to get up from this economic slump, so we’re going to have to endure certain months (or perhaps even most of this year) falling backwards before we can stand tall again. Grim forecasts seem to be the news du jour in July, as FMI (management consultants and investment bankers for the construction industry) released their Construction Outlook: Second Quarter 2010 Report.

While there have been positive signs for the general economy, unfortunately, the outlook for put in place construction for 2010 remains bleak. Total construction in 2010 will be down 5 percent after declining in 2009. Residential construction is expected to begin recovering in 2010. Nonresidential construction will decline 16 percent in 2010. Nonbuilding construction will continue to be a positive contributor thanks to the support of power and conservation and development construction.

The construction industry should prepare for another year of decline in nonresidential construction. Construction lost 35,000 more jobs in May. There have been losses in 31 out of 33 consecutive months, bringing the construction unemployment rate to 20.1 percent, compared to 27.1 percent in the first quarter. An increase in residential construction in 2010 could begin to turn the employment situation, but it is unlikely that it would do much to offset the losses from nonresidential construction.

Report Highlights Include:
1. Residential construction is expected to begin to recover in 2010, with a slight increase in residential improvement construction.

2. Nonresidential construction will see a double-digit decline in 2010. Manufacturing construction will turn down when many of the refinery projects are completed.

3. Conservation and development construction contribute to a positive climb in the nonbuilding segment partly due to the Gulf oil spill cleanup.

4. Water and wastewater construction should see an increase now that stimulus money has been allocated.

5. Small job gains in a number of component industries were offset by job losses in electronic instruments and furniture production.

FMI’s Research Services Group is responsible for design, management and performance of primary and secondary market research projects and related research activities, including economic analysis and modeling, construction market forecasting and database management. Download FMI’s Construction Outlook: Second Quarter 2010 Report.