Simonson, Lustgarten Present Economic Outlook

Eli Lustgarten, senior vice president of Longbow Securities, teamed up with AGC's chief economist, Ken Simonson, to present a depressing outlook for the economy and nonresidential construction at the economic issues forum and luncheon sponsored by Allied North America. Lustgarten even subtitled his talk, "There's a Lot More Pain Before Any Gain." Despite the negative news, more than 600 people attended. "The next several quarters will be a difficult period for most industrial manufacturing companies," Lustgarten predicted. "Housing, which fell 32 percent to about 905,000 starts in 2008, is still looking for a bottom. Current best guess is another 20 percent to 30 percent decline or more in 2009 to about 675,000 with hopefully some stabilization becoming visible over the next 2 to 4 quarters. Nonresidential construction spending, which rose 12 percent in 2008 (15 percent private, 7 percent public) is expected to fall about 5 percent to 15 percent in 2009 and likely a similar amount in 2010." Simonson expressed optimism that the new federal stimulus legislation would buoy public nonresidential construction enough in 2009 to hold losses to a range of -3 to -9 percent. He predicted that single-family spending would level off in 2009 but multifamily construction would continue to slide. On a brighter note, Simonson forecast a drop of as much as 4 percent in construction materials costs in 2009 but warned that prices could spike again as early as 2010. He also foresaw wage increases slowing to a 3 to 4 percent range after having risen nearly 5 percent in 2008.