Contracting Activity is Up 7 Percent in August

At a seasonally adjusted annual rate of $509.4 billion, the value of new construction starts in August rebounded 7 percent from a lackluster July, according to the Dodge Division of McGraw-Hill Construction. Double-digit gains were reported for nonresidential building, while housing showed more modest improvement. During the first eight months of 2002, total construction was up 1 percent compared to the same period of 2001.

The latest monthís statistics lifted the Dodge Index to 153 (1996=100), up from a revised 143 for July. So far in 2002, the Dodge Index has fluctuated around last yearís average of 149-four months this year have been above 149, and four months have been below that mark.

Nonresidential building in August jumped 12 percent to $154.8 billion. The institutional side of the nonresidential market stayed strong, featuring a 16 percent gain for school construction that included the start of a $100 million high school in Illinois and an $80 million university research building in North Carolina. Transportation terminal work also increased 16 percent in August, while healthcare facilities climbed 20 percent. The social and recreational category rose 23 percent, boosted by the start of a $200 million visitors center at the US Capitol in Washington DC, and a $109 million sports arena in Memphis Tennessee.

On the commercial side, offices and warehouses showed some strengthening from a weak July, increasing 5 percent and 20 percent respectively. Hotel construction also picked up in August, rising 47 percent with the help of a $139 million casino expansion in Las Vegas, Nevada. However, store construction was down 5 percent in August, falling for the fourth consecutive month.

Residential building in August grew 2 percent to $245.4 billion. Single-family housing edged up 1 percent, while multifamily housing increased 5 percent. The demand for single-family housing remains at a very high level, as low mortgage rates continue to outweigh the negatives of sluggish employment conditions and diminished consumer confidence.

During August, the 30-year fixed mortgage rate averaged 6.3 percent, down from 6.5 percent in July, and September has seen a further decline to 6.0 percent.

By geography, residential building in August showed this pattern: the Northeast and West, each up 4 percent; the Midwest and South Atlantic, each up 1 percent; and the South Central, down 2 percent.

During the first eight months of 2002, the 1 percent increase for total construction was due to this performance by major sector: residential building, up 9 percent; nonbuilding construction, up 1 percent; and nonresidential building, down 9 percent.

By major region, total construction in the January-August period was the following: the Northeast, up 7 percent; the South Atlantic, up 6 percent; the Midwest, up 1 percent; the West, unchanged; and the South Central, down 9 percent.

Courtesy of EIFS Alliance