Construction contracts decrease 5% in July

Real Estate Weekly, Sept 8, 1993

July's rate of construction contracting retreated 5 percent, slipping back about halfway from June's 11 percent surge of activity, reported the F.W. Dodge Division of McGraw-Hill.

The latest month's data lowered the seasonally adjusted Dodge Index to 98 (1987=100), down from June's revised 103. Weakening occurred in nonresidential building and non-building construction, the two sectors most responsible for June's heightened volume. Residential construction continued to show modest improvement, although its 3 percent advance was still disappointing against the backdrop of low mortgage rates.

Non-residential construction in July dropped 6 percent, falling back from a resurgent June which witnessed the strongest nonresidential total so far in 1993. The institutional building sector was off 15 percent, returning to a level more consistent with the earlier months of 1993. Meanwhile, commercial and industrial building came through with a 6 percent gain, supported by an especially strong volume for stores and shopping centers. Manufacturing building, while still at a weak level, showed improvement for the second consecutive month.

Non-building construction plunged 16 percent, the result of being compared against a June total containing two large power plant projects. Public works construction (non-building excluding utilities) managed a 2 percent increase in July, aided by improvement for highways and bridges.

Residential construction posted a 3 percent gain in July. A 13 percent advance in the value of multifamily starts spurred the increase, as the single family side of the housing market remained essentially unchanged for another month.

At the end of 1993's first 7 months, total construction on an unadjusted basis was maintaining a one percent lead over the same period a year ago. Expansion was shown in just two regions of the country: the South Atlantic and South Central, each with 8 percent gains. The North Central stayed even in the January-July period, while the Northeast slipped 1 percent and the West fell 4 percent.