This is a post from Jim Haughey's blog that covers the US construction industry.

Jim Haughey is the Chief Economist for Reed Construction Data and has over thirty years experience as a business economist, including twenty years monitoring the construction market. He has a Ph.D. degree in economics from the University of Michigan and has previously taught at the University of Michigan, Ohio University, Michigan State University and the University of Massachusetts.

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Construction Industry Forecasts

Notes from Jim Haughey - Oct 28, 2008

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Financial fix still working
Jim Haughey, RCD Chief Economist

In the next few weeks more capital will be put into the banking system by the FRB, the Treasury Department and foreign governments and central banks than the sum of capital injections over the past year. These actions will bring inter-bank lending and loans from banks to non-financial borrowers much of the way back toward normal. This includes the use of most of $700 billion financial relief package plus additional funds from the Treasury.

Construction managers should now focus more on how reduced space and facility capacity demand will impact sales than whether they or their customers can get credit for normal operations. Real construction spending was on track to decline into early next year before the credit freeze; now the decline will be somewhat deeper and longer. This weaker demand comes with an abrupt turnabout in construction materials cost, especially for products from metal ores and oil, which will cushion the severity of the recession.

There is still some risk that problems in the financial markets can spillover into the rest of the economy.  The next few months will bring a weeding out of hedge funds that made bad bets on price trends, smaller banks that originated too many non-performing loans, lenders with too much exposure in the faltering Chinese economy and possibly lenders with the riskiest credit card loans. A few of these could be ugly but none are large enough to interrupt the healing in the financial sector.

 


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Read Other Recent Jim Haughey Posts

08/15 - Contractor Survey: Work backlog rises in 2nd Q but may fall in the summer
08/09 - Modest construction recovery will be supported by two more years of cheap credit
07/29 - Sour economic growth report threatens construction recovery
07/27 - Worry about the deficit not the debt limit
07/27 - Worry about the deficit not the debt limit
07/27 - Worry about the deficit not the debt limit
07/19 - Housing starts rebound.6% in June after two weak months
07/18 - Congress prepares to postpone resolving the deficit crisis assuring an extended period of subpar eco
07/12 - House Transportation Committee proposes to keep federal highway funding at fuel tax receipt level
07/09 - Don’t count on debt limit deal to restart sustained high economic growth
07/08 - Contractors cut 9,000 jobs in June
07/05 - The cost and frustration of selling a home contributes to the delayed housing recovery
07/05 - May construction spending down 0.6%; recovery still on hold
07/01 - FAA stops works on federally funded runway and control tower projects
06/21 - It is not more jobs that will quicken the economic recovery
06/16 - Mays’ 3.5% gain in housing starts does not signal a housing recovery immediately ahead
06/15 - Cautious spending threatens to delay construction recovery
06/10 - Economic and construction recoveries will be subpar for at least another year
06/09 - NYC construction unions may agree to drop expensive work rules to spur more work
06/04 - Contractors add 2,000 jobs in May; overall job gain disappointingly low

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