Across the nation, the overall construction market continues to show significant weakness. Construction activity has fallen dramatically in the past twelve months, in all regions of the country. Of the 50 states, only two are showing growth in activity, year on year, these being Louisiana and Oklahoma. Most states are showing double digit falls in activity, representing a total loss of almost two million construction jobs since the peak monthly employment in the summer of 2007, and over 1 million on a seasonally adjusted basis. This reduction in activity is leading to greatly increased competition among bidders and putting pricing pressure on projects. In many areas, cost trends have become negative, leading to moderate to strong construction price deflation.

It is likely that this weakness will continue through the end of 2009 and well into 2010, and that any recovery in activity will be sluggish. The deflationary pressure will abate, however, as the pool of suppliers and contractors shrinks to align with the reduced demand, both as a result of reduced capacity and business failures. As the market capacity reduces, even modest rises in demand for construction could lead to inflationary pressure in the mid-term. Broader global recovery could also lead to inflationary pressure on construction materials, particularly strategic commodities.