Masonry Magazine August 1998 Page. 23
Construction on Continued
Upward Track Over Next Five Years
School and Public Construction Especially Strong Office Vacancy at 15 Year Low
by William D. Toal of Portland Cement Association
The construction economy, riding an historic wave of expansion, is poised for new growth through the year 2002, reports William D. Toal, former Senior Economist for the Federal Reserve and current Chief Economist with the Portland Cement Association. Toal's forecast was presented to a group of construction industry executives gathered for a briefing jointly hosted by Atlanta-based CMD Group and The Construction Specifications Institute during the institute's 50th anniversary convention.
According to Toal, with the economy in its longest "non-inflationary" expansion on record, U.S. economic performance from a worldwide vantage point is "a sight to behold... a superstar... low inflation with strong economic growth."
"How long can this miracle last-particularly with economic turmoil in the Asian markets of the world? Apparently longer than many analysts, including myself, had thought," Toal confessed. "Inflation has remained low, partly as a result of the Asian turmoil, despite strong steady growth. As a result, the Federal Reserve has not increased interest rates to-date, as had been expected. Economic growth continues unabated."
All of this is positive for the construction industry, predicts Toal. "After reaching new record highs in 1997, construction should expand by approximately 2% this year with only a mild 2% retrenchment expected next year. For now and for the foreseeable future these are, for the construction and construction materials industries, truly the best of times." Toal offered a sector-by-sector analysis of construction, as follows:
Residential construction and housing starts have performed better than expected and continue to do so in early 1998. Demographic trends will continue to put some downward pressure on residential construction, particularly single-family construction. After holding fairly steady at high levels this year, expect residential construction to dip slightly next year before a quick rebound.
Private nonresidential construction has taken a small pause in its rebound. But the fundamentals for most areas of nonresidential construction remain positive. Office vacancy rates have dropped to under 10%, their lowest level in fifteen years. Hotel construction may be about to correct slightly from extremely high levels. Industrial construction has slowed and may weaken further as the Asian Basin situation hits manufactured exports.
Education is one of the strongest areas of construction, especially primary and secondary schools. The school age population began to turn up at the beginning of this decade and is assured to continue to rise through the early years of the next century. As a result, this area of construction is up more than 20% and will remain strong for the foreseeable future.
Public works construction, at 25% of total construction in place and growing, has bee been the workhorse leading to the new record levels of total construction activity. Along with the surge in construction of public
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MASONRY-JULY/AUGUST, 1998 23