CONSENSUS
FORECAST
by Kermit Baker, PhD, Hon. AIA,
Chief Economist
Entering 2004, the AIA Consensus Construction Forecast
Panel expected this year to be the first year of growth in nonresidential
construction activity since 2000. Total nonresidential activity was projected
to increase by almost 3 percent, paced by a strong upturn in industrial
building, modest growth in commercial construction, and small gains in
the institutional sector.
However, entering 2004, our forecast panel couldn’t
have been expected to anticipate fully the negative effect of rising international
tensions on business confidence, the drag of rising oil prices on the
broader economy, or the disruptions that rising costs and availability
problems that construction material commodities would have on the nonresidential
sector.
The net effect is that our forecast panel has scaled
back their projected growth in nonresidential construction for 2004. At
present, this panel expects a 1-percent decline in nonresidential construction
activity this year, with a comparable performance across the major sectors.
However, the panel is almost uniformly upbeat about the prospects for
2005.
The consensus forecast for 2005 is for more than
6 percent growth in overall nonresidential activity. Commercial construction
is expected to increase by just under 6 percent, the battered industrial
sector by almost 25 percent, and institutional building by just over 2
percent. The outlook for the commercial-building sector ranges from a
slight decline to growth of almost 10 percent. Each of the major commercial
sectors is expected to grow by at least 5 percent, with the consensus
for hotel construction approaching 10 percent.
Industrial construction is the sector where our
panelists see the most upside for 2005. Projected gains from our panel
are typically in double-digits as the manufacturing sector of our economy
recovers and exports grow. However, these strong gains, even if realized,
would not nearly make up for the double-digit losses this sector has seen
on average over the past five years.
The institutional sector is expected to see modest
improvement in 2005. All of the major sectors are expected to see gains.
Education, the largest component, is projected to grow by 5 percent, while
health care, the second largest piece of the total, is projected to see
2-3 percent gains.
AIA Consensus Construction
Forecast Panel—
Second Half, 2004
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