Slowing, but still growing
By Industrial Distribution Staff -- Industrial Distribution, 3/1/2000
Construction activity is expected to remain at healthy levels across the country this year, despite rising interest rates and labor shortages that can delay or disruptnew construction schedules. That's due to a continued healthy economy. While overall economic growth is predicted to slow this year, results will remain positive, according to many industry analysts.
In its 2000 Construction Outlook, released late last year, construction industry analyst FMI Corp. noted that while the overall forecast is good, not all construction categories will show positive growth in the year ahead.
After growing nine percent in 1999, residential construction will be unchanged in 2000, according to the FMI report. And non-residential construction, which grew by only one percent in 1999, will rebound mildly to four percent growth this year. Non-building structures, however, jumped nine percent in 1999 and will grow by another eight percent in 2000, "helped substantially in both years by aggressive federal help to highway construction," according to the FMI report.
In dollar terms, residential construction grew by $26 billion in 1999, but will decline by $400 million in 2000. Non-residential construction grew by $2.4 billion in 1999 and will follow that with $10.5 billion in growth in 2000. Non-building structures increased by $11 billion in 1999 and will show another $10 billion increase in 2000.
Single-family housing starts will be down by about seven percent this year, according to FMI. However, coming after 12 percent growth in 1999, the 2000 level will still be the second-best year on record. In dollar values, the growth in 1999 was $22 billion, and the decline in 2000 will be $2 billion.
Multi-family construction is expected to decline from 1999's growth of 11 percent to three percent growth this year. Residential improvements grew only one percent in 1999, the lowest rate since 1995, and will grow at the same rate again in 2000.
On the non-residential side, the expectations for this year are:
- New, privately owned office and professional buildings will see an eighth consecutive year of growth; office construction grew by 16 percent in 1999 and will rise nine percent
- After jumping eight percent in 1999, new school and educational construction will rise nine percent
- Hotel and motel construction will experience its eighth straight year of growth, as well. After rising 11 percent in 1999, it will grow another nine percent
- New retail construction grew five percent in 1999 and will only grow by three percent
- New warehouse construction dropped seven percent in 1999, and will drop again slightly, less than one percent
- Construction of industrial buildings plummeted 18 percent in 1999, and will fall another five percent
- Highway construction, the largest non-residential construction category, increased only nine percent in 1999. FMI analysts predict 12 percent growth this year.
At press time, FMI's chief economist Tom Loy was working on a revised forecast and noted that construction activity is slowing less and growing more than many analysts had predicted late last year. Still, he says, the general trends predicted hold true.
"It's slowing but still growing," says Loy. "I'm still convinced that Dr. Greenspan is going to keep on squeezing the economy until it does what he wants it to do, which is slow down in its growth. But the economy still continues to amaze me in how well it is resisting that."
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