Newton, Mass.— While the construction market continues to slow from its record pace of the late 90s, the situation is not nearly as bad as industry watchers thought it would be just a few months ago. In early March, a host of economic indicators signaled a rebound from the recession, leaving many construction distributors hopeful for a solid 2002.

"It's going to be a choppy road for the rest of the year, but by the end of the year I think things will be up," said Paul Robichaud, Robi Tool Sales, Somerville, Mass.

Robi Tool sells to small and mid-sized contractors in Greater Boston and Southern New Hampshire. The economic uncertainty at the end of last year caused contractors to avoid making their usual big December purchases, Robichaud said. Those dollars were spent in January instead, giving Robi Tool the best January the firm's had in 10 years. That was followed by a slow February, though things began to pick up in early March.

"I have great faith in the U.S. economy and I feel that this year will get back to growth again," said Robichaud. "I think the strength in construction that we've had has basically been a testimony that it's never been as bad as they've said it's going to be."

That may well be true. Daryl Delano, an economist with Reed Business Information, recently revised his U.S. construction forecast to account for the positive economic signals of the first two months of the year. While Delano doesn't expect a rosy 2002 for the construction industry, he says the air of pessimism that existed late last year is waning.

"My general sense is that the overall spending estimate for 2002 is not as pessimistic as it was," said Delano, who expects overall U.S. construction spending to be down just .3 percent this year. "There was obviously a lot more uncertainty in the fall ... We've seen better figures for the manufacturing market than anyone would have expected a few months ago ... and for construction, the residential side held up so much better than anyone ever thought."

"Everyone thought construction spending would tank and that unemployment would be even higher," he added.

Well into the first quarter, none of that had come to pass. In February, unemployment declined for the second consecutive month and the manufacturing sector grew, ending 18 months of consecutive decline. Combined with continued low interest rates, those factors bode well for construction — especially residential, which Delano expects to be down just .2 percent this year. He expects nonresidential construction to be down .7 percent, with commercial spending dropping six percent. Institutional spending — on healthcare, education and similar facilities — will be the bright spot in that sector, rising an estimated six percent.

For most distributors, national outlooks are good benchmarks but they don't always speak to the nuances of their own regions. Jason Bader, vice president of operations for Acme Construction Supply, said the resilience of the construction market has not been felt in the Pacific Northwest, where his company is headquartered.

"We took a very significant decline [in 2001]," said Bader. Based in Portland, Oreg., Acme has closed two branches in the last nine months — in Bellingham and Bellevue, Wash.

"I think the Northwest will be the slowest to feel any positive change," he said.

Acme's longevity in the region — 30 years in Oregon and 20 years in Washington — has helped the firm weather the storm. For real growth this year, Bader is looking to Utah and Colorado, territories Acme entered just a few years ago.

"The Mountain States are doing great. They're going to move," said Bader, who is also vice president of the Specialty Tools & Fasteners Distributors Assn.

Bader expects business in Colorado to pick up in the third quarter. In Utah, he's banking on post-Olympic development.

In places like Hawaii, where the tourism industry was crushed following September 11, things are slowly getting back to normal. Rand Okemura of Honolulu-based Slim's Power Tools said the November-February slow period in his region was much slower than usual this year. In early March, business was beginning to pick up, as contractors lined up work for the spring and summer.

"We're keeping busy, but the market has been slow," said Okemura, pointing to business at both of Slim's locations, on Oahu and Maui. "We're projecting that things will pick up over the summer."

Things have remained fairly stable in the South Atlantic region. Marshall Jones, president of Roanoke, Va.-based Marco Supply, says that though activity has slowed, there is work in the pipeline that will soon emerge for contractors and, subsequently, distributors. Marco Supply has 18 locations from Virginia to Georgia.

The record growth of the late 90s has caused an interesting situation: Things were so good for so long that a slowdown won't send companies spiraling backward.

"Our company is projecting growth," said Jones. "We could see the construction industry contract and we would still grow ... there seems to be plenty of optimism and plenty of opportunity out there."

Robichaud agreed, adding that the boom times may be giving way to stability.

"The pie in the sky is over," he said. "We're getting back to sustainable growth."

It may take a year of ups and downs to get there, though. While he expects things to bounce back in 2003, Delano said the strength of this first quarter won't necessarily last through the end of the year.

"I'm still expecting there are some difficult times ahead for some of the sectors," he said. "But I'm not anticipating that any particular sector is really going to fall off the cliff."