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 - Apr 28, 2011

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US Economic growth slows abruptly in winter quarter
Jim Haughey, RCD Chief Economist

GDP growth in the last quarter was restrained by harsh winter weather, soaring commodity inflation in a rapidly expanding world economy, the phase down of federal stimulus funding and the first round of spending cuts at all levels of government in response to the consume revolt against public deficits. During the spring the weather has to be assumed to be normal. However, the April tornados may cause another quarter of disaster related layoffs.

High commodity inflation will continue at least into the summer.  But the pace will be slower and will cause less deterioration in consumer confidence. Already, wheat and copper prices have retreated slightly and corn and energy prices may have stabilized.  However, the burst of commodity inflation has begun to creep into the prices of manufactured goods and services as well as freight rates. Unexpectedly high prices will continue to be a restraint on real spending this quarter.

Federal spending fell at a 7.9% pace in the first quarter and state and local government spending fell a smaller 3.3%. The public spending cutbacks subtracted 1.1% from 1st quarter GDP growth. This restraint on growth – which becomes positive for growth when budgets are back in equilibrium – will continue unabated, perhaps even larger, this quarter and in the summer quarter.

Nonetheless, spring GDP growth will be above 1.8%, driven by improving consumer confidence, aggressive hiring and the reversal of negative timing impacts in 1st quarter imports.  2011 GDP growth will be in the 2.5-3.0% range with probably a strong 3rd or 4th quarter when ebbing gasoline prices provide a boost to consumer confidence. The consequence for construction spending is continued sluggish activity early in spring and then a delayed turn up before mid-year which will come too late to prevent another annual decline in construction spending this year.

 


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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
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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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