Industry output fell for the first time in a decade last year and will grow at only 0.6 per cent this year.
But the association is predicting output to grow by 2.8 per cent in 2007 and 2008, underpinned by increased commercial spending, infrastructure and water and sewage output.
Home improvement expenditure is also expected to increase in 2007 and 2008 with the return of consumer spending confidence.
Association chief executive Michael Ankers said: 'the recovery in public spending remains very slow and private sector activity remains constrained by the slow down in consumer spending.
'The slow delivery of key Government programmes is now expected to constrain the recovery in public sector investment, with health related expenditure especially vulnerable near term as NHS trusts struggle with record deficits.'