February Construction Contracts Advanced One Percent
Greater contracting was reported for non-residential building and public works, outweighing a moderate decline for single-family housing.
February's data lifted the Dodge Index to 154 (1996 = 100), slightly above a revised 153 for January. The Dodge Index had settled back to 146 at the close of 2001, after reaching a peak of 155 earlier in the year.
"The improved contracting in January and February gets 2002 off to a good start, and shows that construction remains at least for now one of the more resilient sectors of the economy," stated Robert A. Murray, vice president of economic affairs for Dodge.
Non-residential building in February grew 5% to $169.8 billion. Following a depressed January, strong percentage gains were reported for hotels, up 61%; offices, up 32%; and warehouses, up 6%. Store construction, which experienced a more gradual downturn during 2001 compared to the other commercial categories, climbed 20% in February.
"It's true that commercial building continues to be weak by the standards of 1999 and 2000, and a sustained upturn for these structure types is at least several quarters away," stated Murray. "Still, the improved performance in February does suggest that much of the correction for commercial building has already taken place, and the next few months will see an up-and-down pattern more consistent with a market that is beginning to stabilize."
The institutional categories in February were mixed. School construction retreated 9% from an exceptional January; at the same time, February can be viewed as a healthy month for schools, with contracting still 2% above the average level during 2001. Healthcare facilities and transportation terminals were also down from heightened January amounts, with respective declines of 36% and 14%. On the plus side, February showed increases for public buildings (courthouses and detention facilities), up 29%; amusement-related projects, up 5%; and churches, up 4%.
Residential building in February fell 6% to $233.8 billion. Single-family housing was down 9% after a brisk January, although February's level remained 6% above the average monthly pace in 2001. The residential slippage in February was eased by a 16% pickup for multifamily housing.
"Single family housing has been a mainstay for the construction industry over the past year, and the weaker employment picture in recent months may prove to be a near term negative for housing demand," stated Murray. "Still, with the 30-year fixed mortgage rate holding at about 7%, the cost of financing continues to be supportive, which should help cushion any near term loss of momentum for the single-family market."
Four of the five major regions showed reduced residential building in February--the South Atlantic, down 3%; the South Central, down 4%; the Midwest, down 15%; and the Northeast, down 18%. The West was the only region to post a residential increase in February, rising 5%.
During the first two months of 2002, total construction on an unadjusted basis was up 2% versus the same period a year ago. Residential and non-building construction showed respective gains of 11% and 5%, but nonresidential building was down 11% compared to 2001. By geography, the January-February period registered this pattern for total construction--the Midwest, up 22%; the South Atlantic, up 15%; the Northeast, up 1%; the South Central, down 11%; and the West, down 12%.