The American Builders and Contractors (ABC) released its forecast for the 2011 US commercial and industrial construction industry Monday, claiming that "the period of rapid improvement in spending levels did not begin in 2010, and will not happen in 2011," according to ABC Chief Economist Anirban Basu.
The ABC's outlook predicts that total spending will actually be 0.1 percent less than 2010 levels, and privately financed construction level will decline 0.2 percent while publicly financed construction levels will remain virtually flat. "The bottom line is the nonresidential construction recession is largely over, but 2011 will be associated with grudgingly slow progress," said Basu.
Basu continued explaining that "to the extent that there has been recovery in nonresidential construction, it has been concentrated in segments closely tied to federal funding and the stimulus package passed in February 2009 in the midst of the recession."
"After losing about 50,000 jobs in 2010, ABC does not see nonresidential building employment rebounding until 2012. However, ABC predicts that residential construction employment will grow substantially as the number of housing starts will expand by roughly 25 percent," Basu said.
In terms of segments poised to experience construction spending growth in 2011, ABC projects that power will lead the way, with spending rising by an anticipated 5.5 percent.
Segments positioned for decline include those that are closely linked to state and local government spending. With many states and localities trimming both operating and capital budgets, the expectation is that construction volumes in the education category will slip next year.
ABC expects that 2012 will be better for privately financed construction. Credit conditions will improve by that point as large, well-capitalized banks become more aggressive in their pursuit of industry market share. Finally, certain leading indicators have turned the proverbial corner, including ABC's Construction Backlog Indicator, which has been indicating a steady improvement in the commercial and industrial construction outlook.