first quarter of the year because of a downturn in housing expenditures and a loss of momentum in the construction of office buildings. Had it not been for a particularly strong performance by the public sector and substantially improved spending for new industrial facilities, 1964 would have seen little, if any, change in the physical volume of new construction. While the forecasts for the decade appear bright, when may we expect the anticipated growth in the construction industry to take place? This is the question that we must answer in appraising the short-term outlook for the industry. Frankly, I fail to see any signs which would indicate that a substantial improvement in the annual volume of new construction put in place will occur before 1966. In the current year, total expenditures may increase some 3 or 4% over 1964, but this will be due largely to increased costs. Such an increase will rank among the four least impressive annual changes recorded since the end of World War II. Therefore, 1965 will represent the pause for the construction industry to refresh itself before it continues on the strong rate of growth that has characterized construction spending during the last twenty years. To share with you some of the reasoning behind my belief that 1965 will represent a temporary plateau for the industry, let us divide construction into two fairly distinct categories -- residential, which accounts for better than four-tenths of new construction spending, and non-residential. These two sectors of the industry are fairly simple to isolate and the factors governing their short-term economic performance are not particularly related. In 1965, as in 1964, I suspect that their respective performances will be somewhat different. -4-