According to the McGraw-Hill Construction Information Group's annual Construction Outlook '99 forecast, next year's market will see a mix of strengthening and weakening construction sectors, keeping total construction in current dollars steady with its 1998 volume. This year marked the construction industry's seventh straight year of expansion, leading to the continued strength predicted for 1999, despite no overall growth.

"The Asian crisis is slowing the U.S. economy, but so far strong domestic growth is affecting the widening trade gap," says David Wyss, chief economist for Standard and Poor's/DRI. "The recent rise of the Yen is beginning to ease the crises in emerging markets. The Federal Reserve's aggressive interest rate cuts are helping to steady the construction industry."

Public works and utilities sectors are predicted to climb 7 percent, which is largely because of the heightened level of highway and bridge projects coming from the new federal transportation bill, as well as other federal funding initiatives for fiscal year 1999. Single-family dwelling units will retreat 7 percent, which translates into a 5 percent drop in dollar terms. The decline will be the result of slower income growth and sagging consumer confidence, mildly depressing homebuyer demand.

"Amidst a more sluggish business climate, the construction industry will continue to benefit from an enhancement amount of public funding, low interest rates and supportive demographics," explains Robert Murray, vice president of economic affairs for the McGraw-Hill Construction Information Group. "Notwithstanding concerns over the economy, funding for construction projects should remain generally available, particularly from public sources."

Here are some main points for next year's construction market from Construction Outlook:

  • Income properties will rise 3 percent, helped by a further increase for office construction as well as a slight gain for multifamily housing. The slower economic environment in 1999 will contribute to decreased contracting for stores, warehouses and hotels.

  • Manufacturing building will stabilize close to its 1998 level, having already experienced most of its retrenchment due to this year's weakened industrial sector.

  • Institutional building will advance 4 percent, helped by renewed growth for school construction amidst the ongoing need for more classroom space. Public buildings will rebound in 1999 with the help of federal money for courthouse projects, while the health facilities category stabilizes after its brief correction in 1998.

  • Amusement-related construction will slip from its recent strength, as both sports arena and theater projects ease back from the robust levels of the past two years.