Market Watch

Market Watch

The construction industry continues to struggle with the sagging economy. From Septemer 2002 to December 2002, industrial production (IP) for construction continued to slide downhill. Industrial construction also continued to struggle.

Industrial Production Drops Off Again

The construction industry continues to struggle with the sagging economy. For the fourth straight month, industrial production (IP) for construction has slid downhill. The IP for December dropped 0.6%, a mere 0.3% increase from December 2001. The total index fell 0.2% in December but increased 2.1% for the year.

According to the Federal Reserve Bank, the output has experienced a quick deceleration. The annualized change was 4.4% in the second quarter, 1% in the third, and -4% in the fourth. Capacity utilization also slipped for the second time in three months. The December 2002 level is only 0.8 points above the level of a year ago and 7.1 points below the 1972-2001 average.

Industrial Construction Yet to Recover

Electrical contractors aren't the only ones who have been hit hard by the current recession. Manufacturers, including those of electrical products, may have suffered the hardest blow. While McGraw-Hill Construction expects the market for manufacturing plant construction to increase 6% in 2003 due to an improvement in capacity utilization, the dollar amount will still be 22% below 2001 levels and more than 50% below its peak in 1997.

Economists forecast that after remaining at a depressed level during the first few months of 2003, this market will gradually improve. While manufacturing plant construction will most likely continue at historically low levels this year, the automotive market will help boost this sagging sector: Major projects like a $560 million upgrade at General Motors' Ohio manufacturing facility and a $450 million expansion of Honda's Alabama plant are on the horizon.

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