The billions of dollars in stimulus funds being spent on facilities and highway construction projects is the lone bright spot in an otherwise gloomy outlook for the nation's construction industry this year, contractors say.

After a year of near-record layoffs, the construction industry is bracing for another tough year, according to a business forecast issued Wednesday by the Associated General Contractors of America. The forecast, which is based on survey responses from nearly 700 construction firms submitted in late December and early January, finds nearly nine in 10 contractors predicting continued hardships this year.

"Unfortunately for the industry and for our economy, this year's construction outlook is far from positive," said Stephen Sandherr, the association's CEO. "As long as the construction industry remains mired in its own depression, broader economic and employment growth will continue to lag."

Sixty-four percent of responding contractors expect demand for new manufacturing facilities will decline this year, while 71 percent expect demand for new retail, warehouse and lodging facilities will drop. Six in 10 firms say they're unsure whether they will be able to hire new staff or will need to make further cuts.

The Recovery Act, passed nearly a year ago, remains a bright spot. Thirty-one percent of contractors surveyed say they were awarded stimulus-funded projects. Of those, 46 percent say the stimulus helped them retain an average of 24 employees each; 15 percent say the stimulus helped them to add an average of 10 new employees per company; and 12 percent cite the stimulus as driving new equipment purchases.

Fifty-five percent of contractors believe work on public buildings will improve or remain stable in 2010, while more than 60 percent say the same about highway projects and water and sewer construction.

"The stimulus is finally beginning to have a measurable, but limited, impact on the construction industry," Sandherr said.