April's data produced a 164 reading for the Dodge Index (1996=100), compared to 165 in March. The pace of construction starts had retreated at the outset of 2004, when the Dodge Index slipped to 156 in January, below the average of 159 for all of 2003. In the subsequent three months, the Dodge Index climbed back above last year's average mark. "The construction industry continues to move at a healthy clip, supported by the strong amount of single family homebuilding," stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. "To a small degree, April witnessed the broad pattern that's expected to be present during 2004 - single family housing settling back from an exceptionally high volume, while nonresidential building registers modest improvement. The prospects for the public works sector are less certain during 2004, as the next federal transportation bill still awaits passage, but at least April showed modest strengthening after the weak activity during 2004's first three months."
Residential building in April settled back 2% to $309.7 billion. Single family housing slipped 3% in dollar volume from a robust March, while multifamily housing stayed even with its March level. Single family housing was still very strong during April, coming in 11% above its average pace during 2003. Mortgage rates did increase during April, with the 30-year fixed rate finishing the month at 6.0% after the most recent low of 5.4% in March, but there was little negative impact on single family homebuilding. Mortgage rates continued to rise during May, reaching 6.3%, and it's expected that single family homebuilding will settle back to a modest extent as 2004 proceeds. Multifamily housing continues to be resilient in the face of higher vacancy rates, supported by the growing volume of condominium development. Large multifamily projects reaching the construction start stage in April included a $128 million project on the southeastern coast of Florida (Hutchinson Island) and an $88 million project in San Francisco CA. By geography, residential building in April showed this pattern - the Northeast, down 13%; the South Atlantic, down 5%; the Midwest and South Central, each down 2%; and the West, up 5%.
Nonresidential building, at $149.1 billion, was up 2% in April. The commercial categories registered more pluses than minuses, led by gains of 10% for stores and 21% for warehouses. The April store total was boosted by an $85 million renovation of a shopping mall in San Jose CA. Murray indicated, "Store construction showed renewed growth during 2003, rising 10% in dollar volume, and this structure type remains on track for yet another gain in 2004, as retailers and developers strive to stand out in the competitive retail landscape." Office construction in April edged up 1%, supported by the start of a $65 million office project in Los Alamos NM and a $54 million office renovation in Pittsburgh PA. On the negative side during April, garages/service stations were down 2% and hotels were down 4%. The manufacturing plant category in April slipped 13%, as this structure type remained at a depressed level.
The institutional side of the nonresidential market included a 6% gain for school construction and a 16% jump for healthcare facilities. Five large hospital projects reached the construction start stage in April, located in Aurora CO ($310 million), Gilbert AZ ($55 million), Durango CO ($45 million), Seattle WA ($45 million), and Burlington VT ($45 million). Transportation terminal work in April increased 8%, churches edged up 2%, while public buildings (courthouses and detention facilities) were flat. The social and recreational category in April plunged 33%, given its comparison to a very strong March that included the start of a major convention center expansion in Chicago.
Nonbuilding construction in April increased 1% to $86.7 billion. Gains were reported for environmental public works, with sewers up 28%; water supply systems, up 10%; and river/harbor development up 7%. April included the start of five large sewer projects, located in Nevada ($73 million), South Carolina ($55 million), Ohio ($51 million), Georgia ($39 million), and North Carolina ($38 million). However, highway and bridge construction fell 5% in April, continuing the weaker contracting shown by these project types during the early months of 2004. Murray stated, "Since Congress has yet to approve the next multiyear transportation bill, state departments of transportation continue to face uncertainty regarding future funding levels, making it more difficult to proceed with major new projects." Electric utility construction in April declined 7% from its heightened March volume, with both months still representing a departure from the diminished contracting over the past year. Helping to cushion the electric utility decline in April were the start of two very large projects - a $438 million power plant in Alabama and a $300 million power plant in Wisconsin.
Over the first four months of 2004, total construction on an unadjusted basis was up 9% compared to the same period a year ago. By sector, the year-to-date performance was as follows: residential building, up 20%; nonresidential building, down 3%; and nonbuilding construction, down 4%. The large gain for residential building is due to its comparison to a lackluster opening four months of 2003, and the year-to-date increase should lessen as the year proceeds. By geography, total construction in the first four months of 2004 showed the following pattern - the South Atlantic, up 18%; the Midwest, up 9%; the South Central, up 6%; the West, up 5%; and the Northeast, up 3%.
Source: McGraw-Hill Construction Dodge Index, May 27, 2004