Overall the Gross Domestic Product will be up 3.3 percent to 3.9 percent, which is not bad considering everything. General overall construction will also be up a couple of percentage points — 2.5 to 3.5 — but housing will continue to be a problem, more so in some areas of the country than others.

As we are all aware, 2008 is an election year — how could you miss knowing that — and, of course, will influence the economy. The overall economy has been good for a number of years and will probably continue along with routine ups and downs. There are a critical factors that could disrupt this steady growth; namely, the war in Iraq; the price of oil; availability and price of construction/building materials and supplies; interest rates; value of the dollar; the Chinese economy post Olympic games; the weather; and on and on. There is always a laundry list of negative factors that could influence the economy in any given year.

On the positive side, I did not hear a single economist (I sat through more than a dozen economic forecasts recently) say that we were looking at recession.

Mark Vitner, senior economist for the Wachovia Economic Group, who spoke at the Reed Construction Data Economic Seminar (www.reedconstructiondata.com) and the National Truck Equipment Association (www.ntea.com), stated that the economy is stable and growing. The housing decline is not universal across the country but is in isolated markets. In 80 percent of the markets housing costs are actually rising and only declining in areas that have experienced excessively high values.

He noted:

• The economy had solid momentum going into the subrime mortgage crisis.
• We have scaled back our estimate for consumer spending and are now looking for a slightly larger drop in homebuilding.
• Business fixed investment is now expected to rise less rapidly but will still improve.
• Exports have risen nearly as fast as residential construction has fallen, providing a strong positive offset.

Recession? According to Vitner, "The odds of a recession are 30 percent. To put that into prospective, no matter how good the economy was, the lowest odds I would ever give would be 15 percent." He added that this year would be critical.

Income growth is strong enough to support consumer spending and interest rates remain relatively low, Vitner continued.

• Worries about a negative wealth effect appear to be overblown.
• The wealth effect is believed to be, at most, 3 percent to 4 percent over a two-year period.
• Housing prices are still rising in metro areas containing 80 percent of the U.S. population and will likely fall only modestly in the aggregate.
• Past experience suggests spending will not fall; it will merely rise less rapidly than after-tax income.
• Unemployment remains below what is normally referred to as full employment.

The current unemployment rate is 4.6 percent. Except for the job losses posted in August 2007, we would have had a record-setting string of job increases, even with the housing market being down.

• Over the long-run nominal GDP and Treasury yields should align.
• Declining core inflation has given the Fed room to ease in coming months.

Associated Construction Publications (ACP) publishes an annual Consolidated Forecast which looks at the economy on a regional basis, the country divided into the 14 regions as covered by the 14 ACP magazines. In addition to this information each of magazines does a more extensive forecast that appears in this issue. If you are interested in what is happening across the country on a regional level we invite you to visit the ACP website and check the magazine for the specific region in which you are interested.

To give you a taste of what we think will be happening in 2008 we'll take a quick trip across the country and look at the projections that were used in the Consolidated Forecast. California Builder & Engineer's editor is projecting a drop of 0.02 percent in highway and heavy construction which includes all transportation, water and sewer and miscellaneous civil projects. Building in California is expected to do any better with a projected drop of 1.98 percent. Overall, excluding residential, California construction is expected to be down 1.98 percent.

Construction, covering Maryland, D.C., Virginia, and the Carolinas, is looking for a increase of 22.13 percent in highway and heavy construction and an increase of 5.29 percent in building construction for an overall gain of 7.96 percent.

Construction Bulletin, which covers Minnesota and the Dakotas, has a much gloomier outlook. Highway and heavy construction is expected to drop 54.3 percent and building construction slide 12.53 percent. Overall construction will be down 21.71 percent.

Moving over to Construction Digest's territory which is Illinois, Indiana, Ohio, Kentucky, West Virginia, and Eastern Missouri, we expect a decline of 4.86 percent in the highway and heavy sector and an increase of 7.9 percent in building construction. Overall nonresidential construction looks like is should be up 5.31 percent.

Dropping down to Construction News' turf — Arkansas, Louisiana, Mississippi, Oklahoma, and Western Tennessee — highway and heavy construction is expected to be up a very healthy 26 percent and building construction isn't far behind with an increase of 20.67 percent. Overall this market is expected to be up 21.97 percent.

Constructioneer covers New York, New Jersey, Pennsylvania, and Delaware. Although the need is great the highway and heavy construction markets are project to suffer a 13.1-percent drop but buildings on the other hand looks like it will be up 12.8 percent giving the region a positive outlook of 8.27 percent.

The Deep South isn't expected to do well on the highway and heavy side of construction with a projected decline of 14.95 percent. Building construction is, however, expected to increase a modest 3.91 percent saving the region from having an overall negative forecast. The barely positive overall projection is just 0.35 percent.

Michigan's highway and heavy construction prospects are about as dismal as they can get with an expected drop of 27 percent. Fortunately, building construction is expected to increase 30 percent giving the state a projected 12.50 percent overall increase.

Midwest Contractor, covering Iowa, Kansas, Nebraska, and Northwestern Missouri, is looking for a 5.36-percent increase in highway and heavy work but expecting a decrease of 16.20 percent on the building side. The net result will be and decline of 11.25 percent in overall construction.

New England Construction's market includes Maine, New Hampshire, Vermont, Connecticut, Rhode Island, and Massachusetts and is looking for a good 2008 with highway and heavy up 7.89 percent, building construction up 4.82 percent and the overall outlook up by 5.29 percent.

Going to the opposite side of the country, Pacific Builder and Engineer's prospects for 2008 are not nearly as good. Highway and heavy construction is expected to decline 3.59 percent; building construction looks like it will be up 4.38 percent giving the Pacific Northwest a positive overall projection of 2.03 percent.

Rocky Mountain Construction which covers New Mexico, Arizona, Utah, Colorado, Wyoming, and Nevada is anticipating an increase in highway and heavy construction of 9.38 percent. Unfortunately building construction is expected to dip by 5.19 percent bringing the middle of the country an overall decline in construction of 2.03 percent.

Texas should have a 15.52-percent increase in highway and heavy construction activity but looks like building construction will be off 4.04 percent giving the Lone Star State will have a slight overall positive outlook 0.19, just a shade above flat.

Unlike its neighboring states, Wisconsin will have a positive 0.48-percent increase in highway and heavy construction and an impressive 12.72-percent increase in the building sector giving it a very positive 10.19-percent increase.

Putting all this together it appears that the national forecast for 2008 is mixed with the transportation construction markets looking for an increase of 1.48 percent; sewer and water is expecting a serious 15.69-percent decline over 2007; miscellaneous civil construction will also be down but only 2.37 percent; building construction will be up a modest 4.22 percent. The overall projection for nonresidential construction is a solid 2.3 percent which is not great but certainly a lot better than a downturn.

Residential construction isn't expected to change directions until that end of the year, if then. Some of the experts think it will take all of next year and some of 2009 to eliminate the housing inventory that is currently available. If the housing market doesn't start to improve it will start to have a negative impact on the rest of the industry. But, there are a number of economists who believe that the problems with the housing market are not universal across the country but prevailing only in some markets, markets that have become seriously overpriced for any number of reasons. There are other areas of the country where the housing market is stable and in some cases growing.

The dynamics of employer-employee relations are changing. Many employers are finding that people don't want to move to areas of the country where the cost of living is not affordable. As a result a lot of companies are relocating to areas where not only is the cost of living lower, so is the cost of doing business. Although this is not a new trend it has become more pronounced in recent years and is expected to continue.

According to American Road & Transportation Builders Association's (ARTBA) top economist, highway and bridge construction should continue to be among the most stable of U.S. construction markets during 2008, showing modest year-on-year growth. (www.artba.org)

The value of construction work performed on highway and bridge projects will grow to just under $78 billion in 2008, representing a 3-percent to 4-percent increase over the estimated $75.5 billion during 2007. Equally important, recent signs that rapid inflation in the cost of highway construction materials is easing may allow the projected federal, state and local highway investment to support more projects in 2008, says Dr. William Buechner, ARTBA vice president of economics and research.

The most important factor driving the outlook for highway and bridge construction in 2008 will be the federal highway program.

SAFETEA-LU, the highway and transit law, provided a $3.4-billion increase in federal highway investment in FY 2007 over the 2006 level. At least 80 percent of that money will eventually go directly into construction work. Of the remaining 20 percent, about 9 percent goes to design work and 5 percent to right-of-way acquisition with the remainder spent on environmental mitigation, administration, research, and related activities.

As these funds move into the pipeline, Buechner says, the biggest impact will occur in the 2008 construction season because of the time needed to design and start projects. This increase, plus other federal highway funds already in the pipeline, will support almost $30 billion of highway and bridge construction work in 2008, up from just under $27 billion in 2007.

The annual transportation appropriations bill currently working its way through Congress for FY 2008, with another potential increase in federal highway investment, should also help contribute to federal-aid highway construction during 2008. Historically, federal funds finance approximately 40 percent to 45 percent of all highway capital investments, including construction.

Buechner cautions state and local budgets, however, will, at best, finance about the same amount of highway and bridge construction work in 2008 as they did in 2007 — around $49 billion.