Murray predicts the strong multi-family housing market will help offset a flat single-family market, leading to a 5% increase in total residential work this year. “The fiscal 2011 appropriation passed in April had some reductions for highways and bridges and also some steep reductions for [environmental] work, which led us to downgrade our outlook for public works,” Murray says.

Inflation Peaks

Weak construction demand also will help roll back industry inflation, which was recently bumped up by spikes in copper, aluminum and steel prices.

“Structural-steel and rebar prices are starting to come down after hitting their second-highest level on record earlier this year,” says John Anton, steel analyst for the forecasting firm IHS Global Insight, Washington, D.C. Prices were driven by a spike in scrap costs, but there is just not enough demand to support those prices, says Anton. He predicts structural steel will fall to $692 by next quarter from the first quarter's peak of $853 a ton.

Copper was subject to rising global demand and some investor speculation, which drove prices to an all-time high last February, says John Mothersole, Global Insight's copper specialist. He notes June prices are down 10% from that peak.

Lumber, plywood, wallboard and cement prices are all weak, adds Robert Martin, Global Insight's building materials specialist. “Overall, building materials have seen a mild increase, but there is not enough demand to push them any higher,” he says. “Building materials prices should move sideways and end the year at about where they are now,” Martin predicts.