Contracting drops again in April - building contracting, 1992

Real Estate Weekly, June 3, 1992

April's setback of housing starts pulled the month's contracting for total new construction down 3 percent, it was reported by the F. W. Dodge Division of McGraw-Hill, Inc.

April's weakness, following a similar decline in March contracting, brought the seasonally adjusted Dodge Index of total construction contract value back to 93 in the latest month, near where it was when the year began. The Dodge Index uses 1987 as its 100 base.

In April, an added sharp reduction in the depressed multi-family housing sector left the total of residential building 5 percent below March's value. Meanwhile, contracting for nonresidential buildings (commercial and institutional structures) and for non-building construction (public works and utilities) held close to March levels.

"The recent loss of momentum underscores the dependence of the construction sector's recovery on home-building," said George A. Christie, vice president and chief economist for F. W. Dodge. "Normally, as one family housing approaches its limit, expansion is sustained by the revival of commercial building, but that won't happen this time around. Instead, it will be up to public construction - institutional building and infrastructure work - to provide the secondary support later in 1992 and in 1993,"

April's apparent stability of the nonresidential residential side of the construction market concealed some offsetting developments, it was pointed out by Dodge. The month's little changed total of newly started nonresidential buildings was the result of a modest gain in commercial projects that was nullified by a similar decline of institutional work. In a like manner, the "steadiness" of nonbuilding construction masked a decline of highway/bridge construction, which was offset by the start of a sizable electric power plant.

Through four months of 1992, the unadjusted total of newly started construction of al kinds was $76.4 billion, an 11 percent gain over the same period in 1991 when the recession was at its deepest. All major regions of the country are showing varying degrees of improvement this year.