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Down, But Not Out

Dec 1, 2002 12:00 PM, By Michael Eby, Editor-in-Chief

Based on everything I've learned in the last month or two, 2003 won't be the turnaround year in construction everyone was hoping for. Yes, there might be a few pockets of growth here and there, but the overall value of new construction won't see an increase in the coming year. I hate to be the bearer of bad news, but take a look at what these experts have to say.

As reported by the Dodge division of McGraw-Hill in its Construction Outlook 2003 report, a 1% decline in new construction starts is projected for 2003. The electric utilities market is set to suffer the worst losses with a projected 24% decline, down from its record high two years ago. Public works construction is expected to decline by 3% and single-family housing will be flat. The only positive news comes from the income property, institutional, and manufacturing market segments. The need for multifamily housing will push income property dollar volumes up by 2%. Institutional building will be up 1%, even though overall square footage is expected to be down. The surprising leader is manufacturing, which is expected to rise 6%. However, this is still well below its peak level of 1997.

The U.S. Department of Commerce predicts overall construction in 2003 will decline for a second consecutive year. The agency's forecast calls for a 1.2% decline in total construction put-in-place, following an estimated 1.7% projected decline for 2002. It goes on to report that office, hotel, and commercial building markets will see declines for a second consecutive year.

In a presentation at CMD's North American Construction Forecast Conference in October, Ken Simonson, chief economist for the Associated General Contractors of America, offered attendees a mixed bag of predictions. He expects construction related to consumer activity to remain strong and business-related construction to pick up gradually in 2003 if the economy keeps strengthening. Government-funded projects, however, are likely to diminish once current jobs are completed.

Even the guys on the front lines are pragmatic about next year's business climate. Here's what a few seasoned contractors had to say when EC&M staff writer Amy Florence Fischbach interviewed them for her report on the market (see page 38) and posed the question, How do you view the construction outlook for 2003?

• “The downturn will last into 2004.” — Tony Mann, president of E-J Electric Installation Co., Long Island City, N.Y.

• “A very slow recovery out of recession, particularly if uncertainty remains on war, terrorist activity, and big business bookkeeping.” — Steven Witz, vice president of Continental Electrical Construction Co., Skokie, Ill.

• “Depressed, but slowly improving.” — Todd Grasle, executive vice president and chief financial officer of Oregon Electric Group, Portland, Ore.

So sharpen that pencil and keep a close eye on your expenditures because it looks like the industry could be in for another tough year.

For additional forecast information on the 2003 electrical market, visit www.ewweb.com and read what Electrical Wholesaling reported in its 2003 Market Planning Guide.

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© 2012 Penton Business Media, Inc.

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