PIuses & minuses

By Edward D. Hester Vice President The Freedonia Group, Inc.

A S wE approach year-end 1990, Fl construction spending remains weak virtually across-the-board, extending a trend that has lasted nearly five years.

Following a stressful near term period, intermediate-to-long term prospects are somewhat brighter. Construction, especially on the residential side, is typically among the first sectors of the economy to recover from a slowdown. Thus, housing starts and residential construction activity are expected to improve before a general recovery is felt. Demographic trends, i.e., fewer individuals entering the prime firsttime home buying ages, will be a built-in growth-constraining factor for home building suppliers through the end of the century. Offsetting this to some extent will be a reasonably healthy trade-up market, as the more prosperous of the aging babyboomers move to more expensive and spacious dwellings. In addition, residential modernization/improvement activity will show strength, as homeowners seek to maximize the

Housing will prccede a general reco\rery. trade up market will partially balance iewer frst time home buyers. long term Pros" pects for nonresidential construction are mixed.

value of their investments, and apartment/condo owners and developers work to attract tenants and conform to changing building and safety codes.

Industrial building investment, by contrast, will show good strength after the economic slowdown plays out, propelled by the need to replace obsolete capacity and ramp up to serve growing export markets in Europe and elsewhere. Institutional construction, especially for health care facilities (to serve a growing elderly population) and schools, also holds above-average growth prospects.