The turnabout to growth in the overall economy last summer started changes in the economic environment that will lead to resumed growth in construction activity during the winter quarter. Single family housing led the recovery, as it often does, with an initial burst of growth late in the spring that was a major contributor to the growth in GDP last summer.

The balance of construction will begin to recover, market by market, a few months ahead. Retail construction will be one of the first markets to recover because it was one of the first markets to collapse. But recovery will be much delayed for manufacturing and power construction where energy driven projects keep construction spending growing well in 2009.

The enabling changes in the construction economic environment underway in the last half of 2009 include gains in buyer confidence, both consumer and business, declining interest rate spreads for less than prime borrowers, reduction in surplus inventory, including homes for sale and empty nonresidential space and a significant improvement in export sales to a newly expanding world economy, especially in Asia.

All of these factors will remain at relatively depressed levels early in 2010 but their improvement from much more depressed levels early in 2009 will be enough to initiate a gradual recovery in construction activity. By early next spring the list of improving construction market drivers will also include jobs, consumer income, business profit margins and the delayed kick in of the building portion of the economic stimulus plan. These additions will assure that the construction recovery is sustained.

There may be an initial burst of growth, as happened in the economy last summer, but the construction recovery is forecast to be relatively slow. The economy has too big a headwind from the recent credit problems to permit a rapid recovery. Initially the credit problem is lack of credit access by less than prime borrowers. But this will ebb away to be replaced with a constraint on available credit in 2011-12 from the loss of capital to unpaid loans and more cautious financial leverage.