The forecast shrinks the anticipated decline in 2009 construction starts to 15% from an earlier estimate of 20% or more. This is fueled by weak residential and commercial markets and the “emerging loss of momentum for institutional building,” according to the report. Projections say the American Recovery and Reinvestment Act of 2009 will hike public works project starts by 10%, “enough to cushion what was shaping up to be a particularly tough year for construction,” says the report by MHC, publisher of ENR.

“The public works jump-start will be the saving grace for the year,” says Robert A. Murray, MHC vice president of economic affairs. “The real key now is how fast stimulus money, particularly in transportation and environmental market sectors, can make it to the construction site,” he says. He cites Congressional Budget Office projections of a 1.4% to 3.8% lift in U.S. gross domestic product by the fourth quarter of 2009.

Murray says financial markets’ positive response to Obama Administration efforts to fix troubled banks is good news, but the impacts for market recovery could be slow and uncertain. “If the banking sector remains frozen through 2009 and into 2010, we will see a decline in commercial building that will exceed what happened in the early 1980s and early 1990s,” Murray says.