Contracting for new construction climbs in October.

Contracting for new ,construction climbed 12 percent in October, according to McGraw-Hill's F.W. Dodge Division, breaking away from an extended period of sluggish activity.

The October gain lifted the seasonally adjusted Dodge Index to 104 (1987=100), the highest level reported so far in 1992. The advance was broad-based, as each of the industry's three major sectors -- non-residential building, housing, and non-building construction- witnessed improvement.

During the previous five months, contracting had remained stalled at a lackluster plateau 7 percent below the year's opening quarter. "The October data offers a promising sign that the building industry's recovery is getting back on track," said Robert A. Murray, vice president of economic affairs for F.W. Dodge. "From May through September, the momentum of the industry had clearly bogged down. The strong performance in October virtually assures that 1992's fourth quarter will be able to show an increase, even if contracting slips back a bit in the next month or two."

Non-residential construction jumped 16 percent in October, with much of the strength coming from the institutional side of the market. Institutional building had been weakening in the three prior months, reflecting the current stress at the state fiscal level. In October, however, a bunching of several large projects helped lift the institutional total back to its pace set at the start of the year. Categories providing support included transportation terminals, detention facilities, and hospitals. The commercial/industrial sector was also up, due to a pickup in manufacturing construction from a very weak level.

Residential construction advanced 11 percent in October. The continued rise in the value of single-family starts was responsible, as multi-family building remained at a depressed amount. Murray noted, "The pattern of single-family housing has largely set the tone for the construction industry this year.

The soft homebuilding market in the second quarter was a primary factor behind the industry's midyear pause, and the recent single family advance is a key element of October's rebound. What happens to single family housing over the next few months, particularly if mortgage rates continue to edge up, will determine if the industry as a whole can maintain its recovery."

Non-building construction showed a relatively moderate 7 percent gain, benefitting from the start of three major power plant projects in October. If the volatile utility sector is excluded, public works construction slipped back 7 percent as the value of highway and bridge projects receded from a robust September.

At the end of 10 months, total construction contract value was holding onto a 6 percent advance over the same period a year ago. Geographically. the North Central region continues to post the largest increase, up 12 percent, followed by the South Central's 8 percent gain. The coastal regions are showing more subdued improvement during 1992's January-October period: the Northeast, up 4 percent; the South Atlantic, up 3 percent; and the West, up 2 percent.