The depth of the current recession is best measured by declines in construction costs, and they have taken their biggest tumble since the Great Depression of the 1930s. McGraw-Hill Construction forecasts that the recession will tighten its grip on the nonresidential building markets next year despite the best stimulus efforts. It is forecasting the dollar value of nonresidential building starts to fall another 2% next year, following a 30% decline in 2009. Even with a predicted 32% increase in housing starts in 2010, the deteriorating nonresidential building market and double-digit unemployment will keep construction costs on a short leash in 2010.
With that background, ENR is forecasting that its Construction Cost Index will increase 2.3% next year, while the Building Cost Index will increase 1.3%. A year ago, ENR predicted inflation measured by the CCI would fall from 5.7% in 2008 to 1.2% this year. The CCI actually ended the year with a 1.1% gain. The same forecast predicted the BCI would decline 0.5% this year, after a 5.3% increase in 2008. After some ups and downs, the BCI ended 2009 at the same level it started.