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National association: Expect mixed bag in construction next year

Associated Builders and Contractors members can expect a mixed bag in terms of construction activity in 2010, according to the group’s construction economic outlook that was released last week.

Federally funded projects, such as water/sewer and road resurfacing projects, are likely to see a stable 2010, although others less aligned with federal spending will have a tougher year, the report said.

On the jobs front, the nonresidential construction industry is expected to see job loss decelerate and slowly turn around in 2010, the report said.  ABC expects employment to be down only in the mid- to high-single digits on a year-over-year percent change basis compared to a recent 12-month period that saw nonresidential construction employment down 13.2 percent, and heavy and civil engineering down 12.6 percent.

ABC expects institutional construction, including hospital construction, to be soft due to depleted state and local budgets and significant pressure to contain health care costs. However, state governments will continue to receive substantial support from the federal government over the next year, which will help stabilize capital budgets, according to the ABC.

The outlook for materials prices looks to be roughly flat next year after falling nearly eight percent between August 2008 and August 2009, although a sharp downturn in the dollar could generate increases even in the presence of a still weak U.S. construction economy, according to ABC’s outlook.

ABC predicted commercial, lodging and office construction will see a rough 2010 as office vacancy rates rise and hotel occupancy rates continue to fall.

In addition, construction related to manufacturing is expected to be off 19 percent as the sector is unable to keep up with the brisk pace of activity it has seen in previous years, the report said.

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