Economist predicts 1.6% drop in building for 2002, rise in 2003

REAL ESTATE WATCH

August 18, 2002

At an industry seminar last week in Las Vegas, construction economist Bill Toal, formerly of the Portland Cement Association, forecast a 1.6 percent drop in total construction for the year, with an expected increase of 1.4 percent in 2003.

Toal based his forecast on orders for cement products, which are considered a good indicator of construction activity because of their widespread use in residential, commercial, industrial and public works construction.

Toal said that while some sectors remain weak, the economy is showing signs of improvement, with housing starts in particular still robust. Although residential construction, fueled by low interest rates, remains stronger than expected, a small dip is expected before the end of the year, Toal said.

Earlier forecast numbers for residential construction have been revised up. Housing starts were predicted to drop below 1.5 million for the year from 1.6 million last year, but are now expected to come in at 1.55 million for 2002.

Industrial and commercial construction has dropped 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.

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