January's data produced a 152 reading for the Dodge Index (1996=100), up from a revised 149 for December. For 2002 as a whole, the Dodge Index averaged 150. "Over the past year, the construction industry leveled off after a decade-long expansion, and January shows total construction essentially maintaining its 2002 pace," stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction Dodge. "The stability in 2002 resulted from a robust volume of single family housing offsetting steep declines for commercial building. In 2003, however, it's not expected that single family housing will be able to register the same growth as last year. Stability for total construction will require commercial building to at least experience smaller declines, if not the early stages of recovery. January's activity offers a glimpse that such a scenario may unfold, although considerable uncertainty still surrounds this year's prospects."
Nonresidential building in January increased 4% to $148.2 billion, as the commercial categories generally showed improvement. Stores and shopping centers jumped 30%, helped by a $50 million expansion of a shopping center in Las Vegas NV, and hotel construction bounced back 54% from its very depressed amount in December. Office construction in January increased 4%, supported by the start of a $185 million office campus in southeastern Michigan, a $70 million office building in Phoenix, and a $55 million office renovation project in New York City. Murray noted, "Office construction is currently about half the volume reported back in 2000, but over the past few months it does appear to be leveling off following the sharp declines of 2001 and most of 2002." Warehouse construction fell 12% in January, running counter to the behavior of the other commercial categories. January also witnessed a 14% gain for manufacturing plant construction, aided by the start of a $120 million paper plant in Alabama and an $80 million expansion of an automotive plant in Mississippi.
The institutional structure types in January showed mostly decreased activity. School construction settled back 1%, as it continues to retreat gradually from the peak volume achieved in 2001. Transportation terminals were down 1% as well, while larger declines were reported for amusement-related projects, down 19%; churches, down 22%; and public buildings (courthouses/detention facilities), down 26%. Construction of healthcare facilities maintained a brisk pace in January, advancing 15%.
Residential building, at $264.5 billion, rose 1% in January. Single family housing held steady with its December amount, while multifamily housing increased 11%. The single family market continues to benefit from low mortgage rates - the 30-year fixed mortgage rate averaged 5.9% in January, down from 7.0% for the same month a year ago, and has since receded to 5.8% during February. At the same time, diminished consumer confidence may be starting to dampen homebuyer demand, as shown by the January decline for new home sales. By region, residential building in January revealed this pattern relative to December - the Northeast, up 7%; the West, up 5%; the South Atlantic, down 1%; the Midwest, down 2%; and the South Central, down 2%.
Nonbuilding construction in January increased 3% to $91.7 billion. On the plus side, highway and bridge construction grew 21%, boosted by the start of several large highway projects located in Florida, Texas, and Pennsylvania, among other states. Sewer construction surged 56%, as large waste water treatment plants were started in Georgia, Michigan, and New York. On the negative side, river/harbor development work in January was down 31%, while the water supply category fell 36%. Murray stated, "Highway construction in 2003 may fare better than what was thought possible only a few months ago. In February, Congress approved funding for the federal-aid highway program that was down just 1% from the 2002 fiscal year, versus the 10% to 15% cuts that had been considered earlier." The January nonbuilding total was restrained by a 31% decline for electric utilities, as power plant construction continues its downward trend.
On an unadjusted basis, total construction in January 2003 was reported at $35.7 billion, down 8% from January 2002, a month that featured an unusually strong amount of construction starts. By sector, declines were posted by nonresidential building, down 15%, and nonbuilding construction, down 27%, while residential building was up 5%. The regional pattern for total construction in January 2003 compared to the same month a year ago was the following - the West, up 3%; the South Atlantic, unchanged; the South Central, down 5%; the Midwest, down 14%; and the Northeast, down 32%.