California Construction Volume a Mixed Bag; California Construction Activity for the Past Month and for the Year-to-Date is a Mixed Bag, Reporting Both Good News and Bad News.

SAN FRANCISCO--(BUSINESS WIRE)--Sept. 2, 1999--

First, the bad news. According to statistical data compiled by the 25-year-old Construction Industry Research Board (CIRB) and analyzed by Lamberson Koster & Company, surety and insurance brokers in San Francisco, and along with information reported by F.W. Dodge of the McGraw-Hill Companies, California's total construction volume for July is $4.54 billion, down 21.1 percent from June and down 9.2 percent from July 1998.

Nonbuilding (highway-heavy) construction for July totaled $830 million, down $302 million from June 1999. When combined with California's building volume (residential and nonresidential construction) of $3.69 billion, which was down 16.2 percent from the previous month of June, the total construction volume of $4.54 billion was not only sluggish but downright confusing.

Ben Bartolotto, Director of the Research Board, says the major reason for the drop in July activity was that code changes, which went into effect on July 1, "apparently inflated permit activity in June in advance of the changes." The result, says Bartolotto, is the inflated June activity resulted in July's 21.1 percent decline in the state's total construction volume. "July was an aberration," said Bartolotto. "It is as simple as that."

Now for the good news. The California construction volume, measured by building permits and contract awards, for the first seven months of 1999 shows year-to-date increases in several categories: total new housing units are up 16.5 percent; nonresidential or commercial construction totals $9.24 billion, up 7.6 percent from the same period in 1998; total building construction for the first seven months of 1999 is up 17.0 percent at $24.46 billion, and the total construction volume for the first seven months of 1999, including nonbuilding (highway-heavy) totals $28.7 billion, up 13.6 percent.

Bartolotto sees a slower rate of increase for the remaining five months of the year "but still a positive growth because of the strong economy." The CIRB Director notes that rising interest rates could be a factor in slowing the construction industry down even further.

Jay Zoellner, co-owner of West Coast Bridge, says his Northern California firm is having a fairly decent year, "but bidding is extremely aggressive." The Benicia contractor says while Caltrans is putting work out for bid on smaller jobs there is a lot of competition.

"It doesn't seem like the federal funding has kicked in yet," says Zoellner. However, like other contractors he is awaiting the anticipated growth in the state's nonbuilding activity that is expected to be enhanced by federal funding which will generate $800 million in California for each of the next six years.

Although nonbuilding (highway-heavy) activity was down from June by $302 million, Bartolotto was impressed with the June-July combined total of $1.97 billion. CIRB forecasts that nonbuilding activity will show a 2.3 percent increase in 1999 ... the first time it will be in the black in three years.