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The decline in construction demand during the current recession may well turn out to be less than has been generally thought, according to Jim Haughey, Reed Construction Data chief economist, writing in his blog at www.reedconstructiondata.com.

Construction volume has declined because of the slowing economy and the credit freeze that has delayed projects that otherwise would have started even in a recession, says Haughey.

However, credit markets appear to be easing, inter-bank loan rates have declined somewhat, "the commercial paper market is recovering from near extinction making short term financing again available to most business borrowers," and the trillions of dollars pumped into the system by the federal government are having an impact, he argues.

As a result, contractors will face a shrinking economy partially offset by the resumption of some of the projects that were put on hold in the summer and early fall, Haughey adds. He also points to lean inventories and an improving balance of trade as positive signs that the recession may be relatively mild.

Read Jim Haugey's full blog here.