Despite a year of devastating hurricanes, soaring energy prices and the threat of rising inflation, analysts are predicting the overall New England economy to expand 3 percent on average in 2006, and the value of construction put in place, excluding residential construction, to more than double that rate.

This promising outlook follows a year that surprised some industry observers who had called for a 4- to 5-percent boost in construction but instead witnessed a gain of 7 percent. Contractors, equipment dealers and building materials suppliers are expected to have another healthy season here, with the value of non-residential private and public construction put in place likely to exceed $33 billion in 2006. This positive construction forecast mirrors the estimated increase for 2005, and is based in part on anticipated moderate growth in the six-state economy posited by an influential group of analysts representing the business community and academia.

Known as the New England Economic Project (NEEP), a non-profit organization that has monitored the region's economy for more than 30 years, this group is calling for overall economic activity to grow modestly in 2006, peaking at 3.5 percent in the second quarter of 2006 then cooling slightly.

A sustaining feature of the New England economy is the strength of its educational institutions, seen as providing employment opportunities for residents, helping to educate the region's skilled workforce, and contributing significantly to the development and expansion of high technology industries here.

In line with education, FMI Corporation, a management-consulting firm headquartered in Raleigh, N.C., indicates that the value of educational building construction put in place in New England in 2006 will surpass $6.7 billion. The firm believes that overall non-residential building construction to be put in place this year will top $23 billion, an advance of 7 percent over last year. Other building categories expected to be major markets for contractors are commercial ($3.9 billion), manufacturing ($2.62 billion), health care ($2.48 billion), and office ($2.2 billion).

Non-building construction is also likely to rise according to the consultants, who estimate that more than $10 billion will be spent — a gain of 8 percent. Highway and street construction to be put in place in this region will approach a whopping $4 billion. Next in volume will be power, totaling over $3.7 billion, while sewage and waste disposal ranks third with an anticipated $1.3 billion in construction.

The impetus for the large amount of highway and street construction is the SAFETEA-LU bill, signed in August by President Bush, that provides guaranteed funding of $286.5 billion over the period FY 2004–2009. Of this amount $227.6 billon is earmarked for the federal-aid highway program.

According to an analysis by the American Road & Transportation Builders Association, federal highway investment will grow an average of 4.4 percent per year from the FY 2004 baseline of $34.4 billion — a 1.8-percent average annual increase when the impacts of projected inflation are taken into account. In New England, the apportionment of federal highway funds over the six years comes to nearly $11 billion. For FY 2006 alone, the total amount for the six states is $1.83 billion.

The impact of the highway bill on future business was also noted by manufacturers participating in an outlook survey of the Association of Equipment Manufacturers. AEM said the building and repair of highways, bridges and other public works is a significant component of overall construction activity. The construction equipment manufacturers said they expect growth in overall equipment sales to continue through 2006, with a prediction of a 9.3-percent rise in construction equipment business in the U.S.

The prognosis for the construction industry to expand this year is shared by Ken Simonson, chief economist for the Associated General Contractors. Addressing a group of construction company representatives at a recent meeting in the AGC of Massachusetts office in Wellesley, Mass., he said that the U.S. economy remains remarkably robust in spite of war, hurricanes and tight energy supplies. Major concerns for 2006 are escalating materials prices and the high cost of diesel fuel, both of which can be attributed in part to Hurricanes Katrina and Rita, which destroyed many oil and natural gas platforms and other energy-related facilities.

Simonson believes construction should continue to expand in 2006, with continued growth in nonresidential segments offsetting a slight weakening in residential construction.