Construction starts down 3% in September 2004.

McGraw-Hill Construction, a division of the McGraw-Hill Companies, New York, NY, recently reported that overall new construction was down 3% in September from the previous month. The seasonally adjusted annual rate ending September was $564.5 billion. September's results caused the Dodge Index to slip from 175 to 170.

The dip in construction starts during September was reportedly due to a decline in nonresidential construction and public works; residential building, however, was essentially even with August's figures. Despite the September decrease, overall construction during the first nine months of 2004 was up 10% from the same time period last year. "While August and September have seen a slower pace, new construction starts are still on track to post the strongest annual gain in five years," says Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. "Single family housing continues to be the main source of expansion for the construction industry, and this year an improving trend for commercial building has taken hold. In addition, there have been a few unexpected gains in 2004, reported by several institutional structure types and environmental public works."

In September, residential building posted $325 billion, essentially unchanged from August. Within the segment, single family housing posted a 3% decline, but multifamily housing rose 14%. However, in dollar terms compared to the 2003 average, single family housing was up 14% and showed a 19% dollar volume gain over the course of the first nine months of 2004 as compared to 2003. Multifamily construction posted a 13% increase in dollar terms. Mortgage rates remained favorable, with a 30-year fixed mortgage rate averaging 5.8%, down slightly from August's 5.9% rate.

At $148.5 billon (annual rate), nonresidential building was down 4% in September as compared to August. Healthcare facility building starts dropped 26%; office construction fell 21%; school construction decreased by 12%; and hotel building dipped by 1%. With respect to segments that increased, manufacturing facility construction soared by 89%; retail stores by 5%; warehouses by 18%; church building by 3%; amusement-related projects by 4%; public buildings (such as courthouses) by 10%; and transportation terminals by 21%. "While nonresidential building was down slightly in September, due to mixed performance by structure type, the current year has seen this sector begin to turn upward. This is the result of emerging improvement for the commercial structure types and manufacturing plant construction, plus the initial signs of renewed strengthening for several institutional categories," comments Murray.

Nonbuilding construction experienced an 8% decline in September. Highway and bridge construction fell by 23%, due largely to delayed federal funding and the fiscal predicament most states find themselves in. Water supply systems and sewer projects were down 4% and 2%, respectively. On the positive side, river/harbor development rose 6% and mass transit projects increased by 23%.

Geographically, construction starts from January to September were up in all regions: 14% in the South Atlantic; 13% in the West; 9% in the South Central area; 9% in the Northeast; and 5% in the Midwest.

Further report details can be found on McGraw-Hill Construction's web site, www.construction.com.