Web Exclusive! July Construction Contracting Slides 5%
September 10, 2001
The value of new construction starts retreated 5% in July to a seasonally adjusted annual rate of $470.0 billion, according to the F.W. Dodge Division of The McGraw-Hill Companies. Compared to the prior month, moderate declines were reported for all three of the construction industry's main sectors--nonresidential building, residential building and nonbuilding construction (public works and utilities). July's data produced a 142 reading for the Dodge Index, down from June's revised 149 (1996=100). In four out of the last five months, construction contracting has essentially matched last year's average for the Dodge Index, also a 142. "The latest month, while showing generally reduced activity, remains consistent with the sense that the construction industry has leveled off close to last year's pace," stated Robert A. Murray, vice president of economic affairs for Dodge. "The sagging economy in 2001 has dampened commercial building, but for much of 2001 the slack has been picked up by continued expansion for public works, electric power plants and schools." Nonresidential building in July fell 4% to $156.1 billion. The commercial categories generally experienced decreased activity, with declines for warehouses, down 24%; hotels, down 16%; and offices, down 4%. "After reaching an all-time high in 2000, warehouse construction has been the commercial category showing the most severe dampening from this year's high-tech weakness," noted Murray. "There's also been a negative impact on offices, although to a lesser degree than warehouses. The pullback for new office construction in 2001 has been substantial in such cities as Washington, DC; Atlanta; San Jose, CA; and Seattle. Yet other cities, such as New York and Los Angeles, have seen greater construction this year." Contracting for stores in July ran counter to the general downward trend for commercial building, edging up 2%. The depressed manufacturing plant category also posted an 11% gain from its weak June amount. The institutional side of the nonresidential market in July witnessed a mixed performance by structure type. School construction retreated 15%, in what is likely just a brief departure from the elevated levels reported during the first half of 2001. Public buildings (courthouses and detention facilities) slipped 11%, while amusement-related projects were down 10%. On the positive side, these institutional categories posted July gains: healthcare facilities, up 24%; churches, up 29%; and transportation terminals, up 38%. During the January-July period of 2001, total construction on an unadjusted basis was up 2% compared to the same period a year ago. By major sector, nonresidential building registered a 5% decline, but increases were reported for residential building, up 4%, and nonbuilding construction, up 9%. By geography, total construction showed the following pattern in this year's first seven months: the South Atlantic and Northeast, each down 1%; the Midwest, unchanged; the West, up 5%; and the South Central, up 6%.