NEW YORK -- Steep decreases in office and other commercial building, along with more moderate declines in housing and public works projects, will reduce total 1988 construction contracting to $246.2 billion, an industry study predicted this week.

The $246.2 billion figure represents a 4 percent decline from last year's record level, according to the 1988 Dodge-Sweet's Construction Outlook released by McGraw-Hill Information Systems Co.

George A. Christie, the company's chief economist, said negative factors such as the October stock market collapse, tighter federal budgeting and lower consumer confidence are being counteracted somewhat by a brighter outlook for interest rates.

"On balance, this mixture of favorable and unfavorable developments does not pose a serious threat to a credit-sensitive industry like construction as long as a general recession can be avoided," the economist said.

The study forecast a 7 percent drop in nonresidential building, to $89.5 billion, as a result of overbuilding in the office market, where construction is expected to decline 14 percent to $19.2 billion.

In the retail sector, the combined effect of reduced home building and weaker consumer spending could lead to a decline of as much as 12 percent, to $21.6 billion, the study said.

The sole bright spot in the nonresidential market is industrial building, which is expected to rise 6 percent after many years of stagnation, the report said.

Housing construction in 1988 will see a "gentle decline" as lower interest rates lure some home buyers into the market, offsetting the effect of those who have retreated to the sidelines since the Oct. 19 stock market collapse, the study said.

Multifamily home building will drop 4 percent to $26.3 billion because of the large surplus of apartments, the report predicted.

Construction of single-family homes will ease 1 percent to $84.9 billion, it forecast.

The report predicted that nonbuilding construction will go in two directions in 1988: Environmental construction will rise 2 percent, while the transportation sector will slide 4 percent.

It said the combination will produce a 1 percent decline in total nonbuilding construction to $45.1 billion.