November's data lifted the Dodge Index to 165 (1996=100), up from October's 163 and matching the year's high achieved in June. The volume of new construction starts began 2003 on a sluggish note, with the Dodge Index averaging 149 during the first five months of the year. This was followed by a sharp increase to 165 in June, as projects that had been deferred earlier in the year reached the construction start stage. Activity then settled back briefly in July and August, before a modest strengthening trend emerged in the fall. "The construction industry has picked up the pace in recent months," stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction Dodge. "For most of 2003, single family housing has been the industry mainstay, and there are now signs of improvement being shown by other sectors after a weak start to the year. Moving into 2004, the continued improvement by such sectors as commercial building and transportation public works would help offset the modest retreat expected for single family housing."
Nonresidential building in November increased 1% to an annual rate of $149.2 billion. The commercial structure types were generally stronger, including a 98% surge for hotels that featured the start of a $155 million hotel/casino in Louisiana. Warehouses advanced 7%, while both offices and stores registered 3% gains. The November total for stores was helped by the start of a $153 million retail complex in San Francisco. Murray noted, "Hotels and stores constitute the leading edge of an improving trend for commercial building, with each structure type up 7% during the first eleven months of 2003 compared to last year." Despite November gains, offices and warehouses continued to show declines in their 2003 year-to-date performance, with offices down 12% and warehouses down 17%.
The November nonresidential total was also helped by a 14% increase for school construction, boosted by the start of a $65 million science complex at the University of North Carolina plus the start of several large high schools in Virginia and Nevada. Transportation terminal work grew 61%, reflecting the start of a $150 million truck service facility in New York City. On the negative side, November declines were registered by healthcare facilities, down 2%; courthouses/detention facilities, down 3%; and amusement-related projects, down 39%. An especially large 70% decline was posted by the manufacturing plant category in November, given the comparison to an October that included the start of a $600 million conversion of a semiconductor plant.
Nonbuilding construction, at $104.8 billion (annual rate), grew 11% in November. Highways and bridges provided much of the upward impetus, rising 25% after four straight months of subdued contracting. Notwithstanding the strong November, highways and bridges through the first eleven months of 2003 still trailed their 2002 amount by 4%. Murray stated, "The 2003 decline for highway and bridge construction marks a change from the steady growth of the past four years. The prospects for 2004 are still uncertain - it appears that fiscal 2004 appropriations for the federal-aid highway program will receive a moderate increase, but tight state budgets will continue to have a restraining impact on new construction." Other nonbuilding categories showing healthy gains in November were water supply systems, up 22%; and river/harbor development, up 29%. On the negative side, sewer construction in November fell 32%, while new electric utility starts plunged 73%.
Residential building in November retreated 1% to an annual rate of $295.0 billion, reflecting a 2% decline for single family housing and a 1% gain for multifamily housing. While the direction for single family housing was slightly negative, the level of activity continued to be very high, and through the first eleven months of 2003 single family housing was up 12% compared to the previous year. Multifamily housing also showed similar year-to-date growth, climbing 10%. Murray stated, "Even with concerns about rising vacancies and flat rents, construction of multifamily housing has held up fairly well in 2003, and condominiums are now seeing an increasing share of the multifamily total." The cost of financing for homebuyers stayed supportive in November, with the 30-year fixed mortgage rate averaging 5.9%, essentially the same as October. By geography, residential building in November showed the West up 4%, but declines were reported in the other regions - South Central, down 1%; the Midwest, down 2%; the South Atlantic, down 3%; and the Northeast, down 12%.
The 3% increase for U.S. total construction during the January-November period of 2003 was due to this performance by major sector - residential building, up 12%; nonresidential building, down 3%; and nonbuilding construction, down 10%. The regional variation for total construction during the first eleven months of 2003 was the following - the West and South Central, each up 6%; the South Atlantic, up 4%; the Midwest, up 3%; and the Northeast, down 11%.
Source: McGraw-Hill Construction Dodge, Dec. 29, 2003