2009 Midyear Outlook: Worse Than Expected
At the end of 2008, when the nation’s financial system seemed on the verge of a complete meltdown, the outlook for 2009 construction activity certainly was not a rosy picture.
In the 2009 Outlook that Southeast Construction published in January, McGraw-Hill Construction economists Robert Murray and Jennifer Coskren used phrases like “clearly in retrenchment,” “this bodes particularly poorly” and “less than upbeat” to describe what awaited contractors in the then-coming year.
Even so, at the time, McGraw-Hill Construction predicted only a 6% decline, to about $77.6 billion, in the value of new contracts signed in 2009 in the four-state region of Florida, Georgia, North Carolina and South Carolina, compared to 2008. Because the prediction was on the heels of a significant decline during 2008more than 25% from 2007’s levelsit may have sounded somewhat realistic at the time.
But it wasn’t low enough.
Now, McGraw-Hill Construction is downgrading its forecast to roughly $63.4 billion, or $14.2 billion lower than the original estimate. On a regional basis, two of the company’s three broad construction categories are dragging down the overall number. Those two are as likely expected: residential and nonresidential. Meanwhile, nonbuilding—which includes infrastructure—is performing above expectations.
For example, previously McGraw-Hill Construction had forecast that the region’s nonresidential market would deliver nearly $30.5 billion in new contracts during ’09. Six months into the year, the company is now anticipating that this sector will generate about $25.8 billion worth of new work.
Meanwhile, the residential market continues to shrink to new lows. In January, McGraw-Hill’s economists had predicted this sector would deliver nearly $31.1 billion in new projects, or 9% lower than 2008, when that market retrenched considerably. Those same economists now see only $18.9 billion in new residential projects moving forward this year. (For perspective, the residential market experienced $94.7 billion of regional contracts during 2005.)
In fact, the residential market will be hard-pressed to outpace the relatively booming nonbuilding sector, which is benefitting from the stimulus. Indeed, McGraw-Hill Construction now forecasts nearly $18.7 billion in nonbuilding contracts will move forward in 2009. That’s up from its January market outlook of roughly $16 billion, and higher than the $15.5 billion experienced in 2008.
State-by-State Data All four states in the region are suffering.
In Florida, McGraw-Hill Construction now calls for $28 billion in new ‘09 contracts. That’s roughly $3.7 billion—or more than 10%—below the company’s original forecast of $31.7 billion.
For Florida, it’s mostly the...