After seven consecutive years of output peaks concrete production stands to drop 3.4 percent this year and 1.2 percent next year, based on projected cement consumption levels of Portland Cement Association. The two-year lull stems from declines in nonresidential building that offset strong or stable housing and public works activity.

Supporting PCA figures are conditions in key segments economists reviewed at Reed Construction Data's 2003 North American Construction Forecast Conference in Washington, D.C. Associated General Contractors Chief Economist Ken Simonson noted during the mid October event that construction related to consumer activity should remain strong and business-related construction will pick up gradually in 2003 if the economy continues to strengthen. However, government-funded projects are likely to diminish once current jobs are completed.

Simonson cited two key indicators of construction industry health: employment and value put in place; both are relatively flat in construction nationally. Supporting this view, the Census Bureau reported that nationwide construction that was put in place for the first eight months of 2002 was virtually unchanged from the same period of 2001. The seasonally adjusted figures for August, $830 billion, were just 0.4 percent below the total for July. From August 2001 to August 2002, public construction rose by 8 percent, while private nonresidential building activity fell by almost 19 percent.

Other industry economists and analysts rounded out the NACF Conference with a look at individual construction sectors and markets in Canada and Mexico.

Commercial real estate. Federal Reserve Bank of Richmond (Virginia) Vice President and Senior Economist Ray Owens III noted that even with a sluggish economic recovery, prospects for improvement in the commercial market appear in place for 2003. Net space absorption, which had been negative nationwide at about 30 million square feet, is now working its way back. Looking at recent absorption rates versus total supply, Owens also noted that there is a 13-year supply of sublet space on the market. The amount being absorbed currently is low yet rising, he explained, while available space is being capped somewhat by a sharp decline in construction — pointing to a favorable correction soon.

Residential outlook. National Association of Home Builders Chief Economist David Seiders reported the housing sector has done extremely well in a tough economic environment. He said the best bet is funds rate stability through third quarter 2003. Long-term mortgage rates are currently at 6 percent, the lowest since the mid-1960s. Seiders said he is forecasting rates to continue to average that in fourth quarter 2002 and then rise gradually in 2003 and 2004.

Retail/industrial/office construction. Legg Mason's Glenn Mueller, managing director of Real Estate Investment Strategy, foresees stable but modest demand growth moving into next year. Supply is slowing down, creating market equilibrium that is good for the economy. The return to a growth phase should come in late 2003.