A team of local economists predicts government stimulus spending won't provide much uplift for the local construction industry this year because contracting for such federal and state projects is taking longer than expected.

Revenue from construction projects is projected to drop by $1.6 billion this year over last year as the pace of stimulus spending lags, according to a new report from the University of Hawai'i Economic Research Organization.

UHERO said it pushed back its anticipated bump from government contracting by a year, though a continued depression in private construction should still result in lower overall construction spending statewide next year before a small rebound in 2011.

"The U.S. recession is easing, but prospects for a quick Hawai'i construction recovery remain poor," the report said.

UHERO expects government contract awards to grow only 4.5 percent this year, followed by a 36 percent jump next year as major stimulus work kicks in.

Meanwhile, private residential and commercial projects are forecast to remain down because of tight credit, weak housing demand and the tourism slump.

The report isn't good news for an industry that in recent years had been one of the primary drivers of local economic growth, but there are a few bright spots in the forecast, whose authors include UH economists Carl Bonham, Byron Gangnes and Kimberly Burnett along with Paul Brewbaker of local consulting firm TZ Economics.

One prediction is that median sale prices for existing single-family homes on O'ahu won't decline as much next year as UHERO had forecast in a March report.

The organization expects the median will decline 2.4 percent next year instead of 5 percent, followed by a 0.4 percent dip instead of 0.6 percent in 2011. This year, the median price is on pace to drop about 9 percent after a 3 percent decline last year.

The marginal improvements were made in light of recent recovery in the number of home sales and falling inventory, the report said.

Median condominium price predictions also were upgraded to a 9 percent decrease next year instead of 10 percent, and a 3 percent decrease instead of 7 percent in 2011. The median condo price is on pace to fall about 7 percent this year after no change last year.

Another optimistic sign is that for the first time in more than a year, UHERO's biannual construction spending forecast isn't making huge downward revisions to the previous report.

"While there is still considerable downside risk, the stabilization of the forecast picture is encouraging news," the report said.

In March, UHERO had forecast a $2 billion, or 25 percent, decline in Hawai'i construction spending over three years — from $8 billion last year to $6 billion in 2011. UHERO now expects a moderately worse decline of 31 percent to $5.5 billion in 2011.

When adjusted for inflation, the spending declines are more muted.

UHERO forecasts construction cost inflation at less than 1 percent this year and next year.

On the job front, the report expects the industry to lose 7,330 jobs over three years — from 38,020 jobs last year to 30,690 in 2011. The expected loss is less than the previously forecast reduction of 8,130 jobs over the same period, though the improvement was mostly due to a revision to how many jobs were lost last year.

The city's planned rail line could significantly offset anticipated spending and job declines, but UHERO doesn't include the project in its forecast because of uncertainty as to whether work will begin in December as the city expects.