Construction deflation forecasts... not a surprise

Davis Langdon’s latest forecasts for tender prices make for interesting reading. They are anticipating a fall in tender prices during 2009, 2010 and even in the first quarter of 2011. By 2010 Q1, tender prices are expected to be between 6% and 9% lower than a year earlier and by 2011 Q1, tender prices are expected to be 3% and 5% lower than a year earlier.

Grim reading indeed.

However, the evidence appears to be on their side.

Construction output, for 2008 Q4, fell by 7.3% compared to a year earlier, the sharpest rate since 1980 and new orders fell at its sharpest rate since 1983. Provisional 2009 Q1 figures highlight an 8.6% fall compared to a year earlier illustrating a worsening of the situation. The Construction Products Association forecasts that output in 2009 will fall 12.1%, the sharpest rate since records began (1955) with a further fall of 3.4% in 2010.

This article continues at Noble Francis' blog