Construction is heading for two years of recession says the Construction Products Association in its latest forecast.

It puts output down 1.3% this year and 1.6% next year, before a sluggish recovery starts in 2010.

The net result is that activity will fall by more than 5% from the where it was in the first quarter of this year and reach levels roughly equivalent to those in 2004.

That means we can expect to see around 200,000 jobs axed from the industry and more if the industry manages to push up its parlous productivity.

But even this gloomy forecast looks to be a bit on the optimistic side on house building if we are to believe the figures put about recently of a cut of 70,000 in the number of homes built.

The forecast puts the fall in new private housing activity at 20%. A reasonable call from where we stand now, but if the noise coming from within the industry is to be believed the collapse could be far greater.

It is also worth noting that flats take more construction activity per unit than houses on a crude like-for-like basis. This could increase the drop in construction workload, as flats are hardly flavour of the month.

The other two big downside risks are with the commercial sector and private housing RMI. The association sees both skirting recession this year and even after that coming away quite lightly, given the scale of drops in the past.

The forecast by the association is a fair one, given the data we have, but there are big downside risks.

Personally I see nasty prospects in private housing RMI and that is a huge sector. Also it will be intriguing if not uncomfortable to see how quickly the property sector reacts to the current economic climate in restricting its exposure to new build. It could be that the commercial sector slows faster than in the past.

All around it is hard to find optimism within the forecast.

And the news that inflation is at 3.3% - above the consensus forecast - will add just more fuel to the fire burning up construction prospects with the likelihood of interest rate rises increasing greatly.