Consulting-Specifying Engineer - January 2009 - (Page 45) mic outlook was the postponement and cancellation of scheduled 2009 starts. There was no downturn in starts at the end of 2008. Retail and office construction Commercial (retail) construction spending dropped 11% in the 12 months ending in October 2008. The value of retail starts fell 3.5% from mid-2007 to mid-2008 as record high energy prices forced a reduction in real income and the volume of consumer spending. This existing weakness in this market led to a 5% plunge in retail starts from July to October with declines continuing well into 2009. Inflation-adjusted consumer spending recorded an unusual decline in the final quarter of 2008, which will keep construction activity shrinking well into 2009. Note that most of the reported fall in consumer spending is due to falling prices for energy and other goods Recession cuts need for additional building space The 2008-2009 recession will be more severe than the mild recessions in 2001 and the early 1990s, but less severe than the deep recessions in the early 1980s and the mid1970s. The recession will be front-loaded—the panic from the surprise credit problems in September 2008 caused a larger-than-normal share of the inevitable spending cutback decisions to be made early. Q4 2008 GDP will drop as much as 4% with several smaller declines following. The new Congress will enact another economic stimulus spending plan very quickly. The 2008 stimulus spending interrupted the recession in Q2 2008 with +2.8% GDP growth. The new plan will have a similar impact in mid-2009 and will contribute to ending the recession in summer 2009. Much of the stimulus will be added funding for public works, and some will be targeted to public buildings. Recovery from the recession will be unusually slow because credit costs will remain high for a recession period as lenders try to replace the capital lost to unpaid residential mortgages. GDP growth will remain sub-par (under a 3% trend) through 2010. The decline in the nonresidential building market is not due to overbuilding, but to credit access and overall economic spending issues, so there is some additional growth left in this building cycle beyond 2010. Construction spending $ millions 2007 Education * K-12 University Healthcare ** Hospital Assisted care Medical office Office Retail Hotel Manufacturing Amusement and recreation Public safety Religious All nonresidential buildings * Also includes preschool, libraries, museums, and administrative ** Excludes federal buildings Consulting-Specifying Engineer • JANUARY 2009 Annual % change 2007 12.9 14.0 12.5 11.5 13.7 3.9 5.2 19.4 15.4 59.0 21.1 13.8 26.5 -3.8 17.6 2008 8.5 5.0 17.0 6.5 4.9 18.9 3.6 13.2 -2.9 30.2 46.0 7.4 24.5 -7.9 12.1 2009 0.1 -2.0 5.5 0.8 0.0 8.5 -4.0 1.7 -9.1 2.9 6.0 -4.5 1.9 -7.9 -0.5 13.4 11.1 -1.6 13.4 7.4 33.2 23.8 10.0 12.1 -3.4 11.8 7.0 16.7 Annual % change July ‘04 to July ‘07 July ‘07 to July ‘08 July ’08 to Oct. ‘08 96,085 58,391 29,887 42,904 29,551 3,684 8,532 64,702 88,478 28,602 42,538 21,610 9,869 7,454 402,242 5.0 12.9 -0.6 16.8 4.3 20.2 11.8 14.0 -3.5 27.0 53.9 23.9 24.8 -8.7 12.2 25.5 3.5 -48.9 19.6 -19.8 8.2 19.1 19.0 5.0 -8.2 5.7 45
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