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Commercial and industrial construction expected to grow by 2.4 percent in 2012

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The Associated Builders and Contractors (ABC) released its 2012 economic forecast Thursday for the U.S. commercial and industrial construction industry, and the news was lukewarm.  “ABC’s analysis of construction trends indicates 2012 will be a year of gradual progress as advances in private construction are partially offset by ongoing declines in publicly financed construction,” said ABC Chief Economist Anirban Basu.

Construction spending is expected to grow 2.4 percent next year following a 2.4 percent decrease in 2011. “The pace of recovery in the nation’s nonresidential construction industry remains soft, and 2012 is positioned to be a year of slow gain,” Basu said in a statement.

On the employment side, the forecast by the Washington, D.C.-based trade group expects commercial construction employment to increase 0.4 percent in 2012 following lackluster 0.6 percent growth in 2011. “Employers will continue to seek increased productivity among existing workers in order to boost weak industry margins,” said Basu.

Yet, contractors may see a bright spot with respect to materials prices.  In 2011, prices for construction inputs rose 7.5 percent,” said Basu. “ABC expects 2012 materials prices will rise 4.7 percent. “

2012 should also bring improvement in the volume of privately financed construction as economic conditions gradually improve and lending institutions become more comfortable lending to deep-pocketed investors.  “More importantly, certain leading indicators have turned the proverbial corner, including ABC’s Construction Backlog Indicator. This forward-looking measurement has shown slow but steady improvement in the commercial/institutional construction category, presently associated with a backlog of 8.4 months,” Basu said.

With the impact of stimulus-funded projects steadily declining, the U.S. nonresidential construction sector will become increasingly dependent on privately financed projects for growth, he added.  The forecast says energy and health care will be drivers for construction, with power construction expected to lead the way with a projected 9 percent increase in spending in 2012.



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