The August statistics produced a 173 reading for the Dodge Index (1996=100), down from July's 179 which was the highest level so far in 2004. While the Dodge Index has shown an up-and-down pattern over the past four months, it remains well above the 160 reading reported at the beginning of the year. "Total construction continues to move at a healthy pace, and it's now virtually certain that full year growth for 2004 will exceed the 5% gain in 2003," stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. "Single family housing is still exceptionally strong, and the broad trend for commercial building this year is generally upward, even with the reduced amount of construction starts in August. At the same time, tight fiscal conditions over the past several years continue to have a restraining influence on the institutional structure types and public works construction."
Nonresidential building in August fell 7% to $157.7 billion (annual rate). Weaker activity was registered by the major commercial categories - stores, down 4%; warehouses, down 7%; offices, down 14%; and hotels, down 32%. In the case of offices, the comparison was against a heightened July, which included $800 million related to the start of the Freedom Tower in lower Manhattan. If this project is excluded from the July statistics, new office starts in August would be up 37%. Several large office projects reached the groundbreaking stage in August, including the $400 million headquarters for the New York Times in midtown Manhattan and an $80 million federal office building in Chicago. Through the first eight months of 2004, the major commercial categories showed these dollar volume gains relative to 2003 - stores and warehouses, each up 2%; hotels, up 8%; and offices, up 9%.
The institutional structure types had a mixed August. Reduced contracting was registered by schools, down 4%; amusement-related projects, down 11%; transportation terminals, down 13%; and public buildings (courthouses and detention facilities) down 17%. On the plus side, church construction increased 12%, while healthcare facilities surged 46%, boosted by the start of large hospital projects in Colorado ($130 million), Utah ($123 million), Florida ($78 million), Virginia ($65 million), and California ($60 million). Murray noted, "After experiencing a brief pause during 2003, healthcare facilities construction appears to be regaining an upward trend this year. Much of the push is coming from large hospital projects, while contracting for clinics and nursing homes has stayed flat." The August nonresidential statistics also included a 49% drop for manufacturing-related buildings, following the sharp increase for this structure type in July.
Residential building, at $315.5 billion (annual rate), slipped 2% in August. Single family housing was down 3% from July, although the level remains very high, up 6% from what was reported back in January. The single family market continues to be supported by low mortgage rates - the 30-year fixed rate averaged 5.9% in August, down from 6.1% in July, and September has seen this series recede even further to 5.7%. Though the first eight months of 2004, single family housing was up 19% in dollar terms, and up 12% in the number of units. Multifamily housing in August advanced 3%, helped by the continued strength for condominiums, including the start of a $52 million condominium project in Seminole FL and a $48 million condominium project in Philadelphia PA. The year-to-date figures for multifamily housing show the dollar volume of new construction up 12%, although the number of units was down 4%. The regional pattern for residential building in August reveals a 4% gain in the South Central, but reduced activity in the Northeast and Midwest, each down 1%; the West, down 4%; and the South Atlantic, down 6%.
Nonbuilding construction in August fell 2% to $100.1 billion. Public works construction retreated 1%, with the loss of momentum coming from the environmental categories - sewers, down 15%; river/harbor development, down 20%; and water supply systems, down 35%. On the plus side, highways and bridges had a strong August, with respective gains of 11% and 25%. Helping to boost the bridge total in August were the start of major renovation projects in Houston TX ($175 million) and New York City ($137 million). While August was relatively strong for transportation-related work, the broader trend during 2004 has been downward, with the first eight months of 2004 showing a 2% decline for highways and a 16% decline for bridges. Murray indicated, "Uncertainty related to when a new federal transportation bill will be passed has played a role in dampening this year's highway and bridge construction starts." Electric utility construction in August was very weak, falling 52% from July, and for the first eight months of 2004 this project type was down 28% from the previous year.
The 10% gain for total construction during the January-August period of 2004 reflected this pattern by sector - residential building, up 18%; nonresidential building, up 2%; and nonbuilding construction, up 1%. By region, the year-to-date performance for total construction was the following - the South Atlantic, up 15%; the West, up 12%; the Northeast, up 9%; the South Central, up 8%; and the Midwest, up 6%.
Source: McGraw-Hill Construction, Sept. 29, 2004