TODAY'S NUMBER - 634.76

That's how much the Dow Jones Industrial Average fell today (a loss of over 5.5% of total value) and it is, in part, a reaction to Standard & Poors stripping the United States of its AAA credit rating. But what does it mean for construction?  The truth is that it is hard to tell right now but a few things seem certain.

First, interest rates are likely to rise (I think that they will only rise slowly) but this will prove to be a drag on the economy and hence the construction industry.

Second, it will negatively impact consumer confidence, which will, in turn hold back economic recovery and the construction industry.

Third, there is likely to be a fall in the cost of oil (and oil derived products) and the cost of base metals which will act to hold down some construction costs even as CPI inflation continues to lap at the 2.5% mark.

Finally, with the ongoing slump in the AIA's Architectural Billing Index, rising interest rates and this new delay in  (dead-weight on) the recovery, it is likely that the failure of contractors, sub-contractors and even some consultants will accelerate as those unable to hold on will finally succumb to the ongoing construction recession.

The only positive is that, according to Fidelity Investments, REITS will start to look like a decent investment (as a hedge agaisnt inflation).

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posted by The QS

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