U.S. architects group cuts non-residential forecast

NEW YORK (Reuters) - Spending on U.S. non-residential construction projects like hotels and commercial space will fall more deeply this year and next than was thought likely six months ago, according to a semiannual forecast by the American Institute of Architects.

The trade group, whose members' billings for designing projects are a leading indicator of construction activity, predicts a 16-percent decline in construction spending this year, and another 12 percent decline in 2010.

In January, the AIA had forecast an 11-percent drop in 2009, followed by a further 5 percent slide next year, but has revised its estimates given continued U.S. economic weakness and tight credit conditions.

"This downturn is steeper than we expected six months ago," AIA Chief Economist Kermit Baker said. "The job losses have been worse than anticipated six months ago. Credit market and financing are thawing, but are taking longer than expected."

Construction of retail spaces, hotels and office building is expected to fall by more than 20 percent this year, with smaller -- but still double-digit -- declines next year, according to the forecast. Smaller declines are forecast for religious and educational facilities and for the healthcare sector, the AIA said.

The earliest a recovery in non-residential billings would take root is the first quarter of 2010, and since construction spending lags billings by up to a year, a recovery in building activity is not likely before 2011, Baker said.

The AIA's monthly architecture billings index (ABI) has indicated contraction in the sector since January 2008, though it is off its 2009 lows. The index is considered a measure of construction spending nine to 12 months in the future. The June ABI is due Wednesday.

Companies that sell to construction markets include diversified manufacturer Honeywell International Inc (HON.N), lighting maker Acuity Brands Inc (AYI.N) and electrical components maker Thomas & Betts Corp (TNB.N), as well as heating and cooling systems makers Ingersoll-Rand Plc (IR.N) and Johnson Controls Inc (JCI.N).

Caterpillar Inc (CAT.N), Deere & Co (DE.N), Terex Corp. (TEX.N), Illinois Tool Works Inc (ITW.N), Parker Hannifin Corp (PH.N) and Eaton Corp (ETN.N) also participate in the sector.