WEB EXCLUSIVE NEWS! Construction Activity in June Rebounds 5%
June's data lifted the Dodge Index to 147 (1996 =100), compared to May's revised reading of 141. The first two months of 2001 began on a strong note, with the Dodge Index averaging 150, but then contracting retreated during the next three months prior to June's upturn. "The rebound in June offers more evidence that the construction industry is in fact stabilizing close to last year's pace, and is not in the early stages of an extended downturn," stated Robert A. Murray, vice president of economic afthirs for F.W. Dodge. "The mix by project type is of course different in 2001--less commercial building, but more schools, public works, and power plants, combined with high-level stability for housing. As a result of this offsetting behavior by project type, the construction industry as a whole is shaping up as one of the healthier sectors of the economy this year."
Nonresidential building in June increased 11% to $165.8 billion. Substantial gains were reported for hotels (up 37%) and warehouses (up 36%) from very depressed levels in May, although both project types remain well behind last year's pace. Stores and shopping centers advanced 8%, while offices edged up 2%. "There's no question that 2001 is seeing a broad downward trend for commercial building, but June's contracting suggests that the decline is perhaps best characterized as a measured pullback, as opposed to collapse," stated Murray. "The dot-com correction is definitely having an impact on the warehouse and office markets, while reduced business travel has made the lodging industry more cautious about adding to capacity. Yet, while commercial building this year is coming in below its elevated pace of 1998-2000, it appears that the level of construction will still be well above what was reported during the mid-1990s."
The nonresidential total in June was also helped by a 5% increase for school construction, as the strong 2001 performance for this structure type continues. Several of the smaller institutional categories showed improvement after a weak May, including public buildings (courthouses and detention facilities), up 42%; amusement-related projects, up 41%, with the help of a new $88 million performing arts center in Wisconsin; and healthcare facilities, up 14%. Transportation terminal construction in June was down 6%, and religious building fell 22%. Manufacturing plant construction continued to be very weak, with June seeing a further decline of 8%.
Nonbuilding construction, at $110.3 billion, climbed 8% in June. A substantial boost came from a 36% increase for electric power plant construction, reflecting the start of major projects in Pennsylvania ($500 million), Alabama ($380 million), Mississippi ($325 million), California ($225 million), and Ohio ($180 nuillion). Murray noted, "A number of states are taking steps to speed up the approval process for power plant projects to go ahead, and the result this year has been even more growth in construction." The public works sector generally showed reduced contracting in June, with water supply systems down 25%, highways and bridges down 16%, and sewers down 7%. However, the public works total was able to register a slight 1% increase in June, due to the start of the $1.6 billion Gulfstream natural gas pipeline connecting Alabama and Florida.
During the first six months of 2001, total construction on an unadjusted basis held steady with its corresponding dollar amount a year ago. Nonbuilding construction led the way with a 7% gain, followed by a 3% increase for residential building. Nonresidential building during the January-June period was down 7%. By region, the first half of 2001 showed this pattern for total construction: the West and South Central, each up 4%, while 2% declines were registered in the Northeast, Midwest, and South Atlantic.