Related Links: Full 3Q Cost Report (Subscription required) Construction economists continue to dial back their forecasts for 2011. Single-family housing, public works and the institutional-building markets have all stumbled badly in 2011, says Robert Murray, McGraw-Hill Construction's chief economist. The few bright spots, such as multifamily housing, manufacturing and powerplants, “won't be able to outweigh the minuses,” he says.Murray estimates that total construction starts in 2011 will come in at $408 billion, a 4% decline from 2010. Since ENR's second quarterly cost report, the forecast for total residential work has been pulled back from a 5% increase to a 2%

There has been an economic coup d'etat, and no one seems to have noticed. After pundits gave tax cuts decades to prove their economic worth, those experts have been quick to declare Keynesian stimulus economics a failure after only a few years. Seemingly overnight, budget hawks seized the initiative and implemented an economic policy of austerity that slows down the recovery but does not address the high unemployment problem. Related Links: Hard Times Draw the Line For Bargaining Contractors Hold The Line on Pay How John Deere's New Hybrid Wheel Loaders Get Their Juice Creating Cash From Trash Floods Disrupt

Public construction is starting to feel the impact of the battle over the federal budget deficit and the weak financial position of many state and local governments. In April, public construction was running at a seasonally adjusted annual rate of $282 billion, which was 7.5% below April 2010's pace. It also marked the fourth consecutive month the seasonally adjusted annual rate has declined, according to the U.S. Dept. of Commerce (see chart). On a year-to-date basis, total public construction through the first four months of this year was $79.2 billion, which was 4.2% below the same period of 2010 (see

Although ENR’s cost indexes measure the costs of non-residential buildings, the stalled recovery in the housing market still had a major impact on index movement. After falling 27% over the previous five years, lumber prices spiked in the first quarter of last year as federal tax credits boosted the depressed housing market. But lumber prices faded as the housing recovery stalled, ending the first quarter of this year about 4% above 2010’s level. In addition, steel prices also spiked in 2010. Related Links: Economics: Japan Quake Won�t Shake Up Costs as Recession Trumps Rising Prices Confidence Survey: Top Industry Execs

Readers of ENR generate a steady stream of questions about the magazine’s indexes and how to accurately apply them to construction projects. To help clarify the nature and use of the cost indexes, here are answers to the most frequently asked questions as well as suggestions on how to avoid costly mistakes. Related Links: Economics: Japan Quake Won�t Shake Up Costs as Recession Trumps Rising Prices Confidence Survey: Top Industry Execs Believe the Market Has Turned a Corner Bidding: Price Escalations May Lead Aggressive Bidders To Default Asphalt: Weak Demand vs High Oil Prices Executive Compensation: Companies Seeking �Game Changers�

Despite the headline-grabbing attention of federal deficits and budget cuts, the real problems facing construction remain the prolonged recession in the private nonresidential building markets, the weakening of the once-dependable public markets, a stalled housing recovery teetering on the brink of slipping back into recession and high unemployment. That does not add up to a quick recovery, which in turns equals low inflation abetted by desperate bidding. The sudden turnaround from the Keynesian economics of stimulus to the Hoover-era economics of austerity only make the outlook bleaker. Related Links: Confidence Survey: Top Industry Execs Believe the Market Has Turned a

Photo: Courtesy of Lester Ali Earlier this month, tenants began occupying architect Frank Gehry’s first residential supertower, which is New York City’s eighth-tallest high-rise structure and the tallest residential tower in the Western Hemisphere. The 76-story building, with its spectacular folded facade, is the first icon to appear on the lower Manhattan skyline since terrorists destroyed the 110-story towers of the World Trade Center. The $875-million building, although not completed, is on time and on budget, says the owner, Forest City Ratner Cos. The rental building’s signature is the undulating waves of stainless steel that reflect the changing light. The

No more federal stimulus money, no highway bill, a weak economic recovery, a stalled housing market, a nonresidential building market yet to bottom out, gridlock in government, continued high unemployment—it could add up to no inflation in 2011. That is about as simple as a cost forecast can be. Inflation? Not so much. Engineering News-Record expects its Building Cost Index to increase just 1.3% next year after rising 3.6% in a difficult 2010 market. ENR projects its Construction Cost Index to increase 2.0% in 2011 following this year’s 3.6% gain. Related Links: Confidence Index: Heads of Major Firms Believe Market

This year started out well, with a stimulus jolt to the depressed homebuilding and public-works markets. But it ended badly when the tax credits to home buyers expired, federal stimulus spending fell short of expectations, and the non-residential building market tanked all on its own. As a result, 2010 will probably become known in the economic lexicon as “the stalled recovery.” In a word, what stalled is housing, which traditionally leads the construction industry out of a recession. A year ago economists were predicting 30% increases in the housing market, but that turned into a mere 6% gain, not enough