Construction Industry May Show Signs of Life in 2003

Aug. 30, 2002
It's not exactly a light at the end of the tunnel, but the outlook for the electrical industry got a bit of a boost when Bill Toal, formerly of the Portland

It's not exactly a light at the end of the tunnel, but the outlook for the electrical industry got a bit of a boost when Bill Toal, formerly of the Portland Cement Association, told attendees of the 7th Annual CMD/CEO Breakfast that the construction market may be turning around.

The Portland Cement Association provides a reliable forecast, as cement products are a good indicator of construction activity because of their widespread use in residential, commercial, industrial and public works construction.

Although he forecasts a 1.6 percent drop in total construction for 2002, the increase in industrial production and low inflation and interest rates may be indicators that the market will increase by 1.4 percent in 2003. Strengthening those numbers are the revisions made to housing start predictions: Once expected to drop below 1.5 million in 2002 after a high of 1.6 million in 2001, housing starts should top out at 1.55 million for the year.

Industrial and commercial construction have dopped off significantly this year and Toal suggested that this was a “red flag” for this segment of the market, with a forecast drop of 10.8 percent by year's end. However, the industrial and commercial sector is forecast to begin recovering with a 5 percent increase in 2003, according to Toal.

Airport and school construction will remain strong through the final two quarters of the year, as will public works. In particular, public works has and will continue to benefit from the U.S. Transportation Equity Act for the 21st Century, which provides federal funding for transportation construction. This high-level funding, which has been in place since the Act was passed in 1998, will continue to trickle down through public works construction and help maintain that market segment's strength.

Toal also presented a macro-economic forecast for the remainder of 2002 for the inflation-adjusted gross domestic product (GDP).

He reported that while the GDP experienced a negative percentage change in the third quarter of 2001, the first quarter of 2001 delivered a 5.8 percent increase. He expects the final numbers for the second quarter GDP to report a 2.5 percent increase, with the third quarter rising to 3 percent and then 4 percent in the fourth quarter. This data points to economic growth in the coming years.