Nationwide construction activity slid five percent in March.

Contracting for new construction retreated 5% in March to a seasonally adjusted annual rate of $462.8 billion, according to the F. W. Dodge Division of The McGraw-Hill Companies. Nonresidential building and housing showed slight weakening, while a larger decline was reported for non-building construction (public works and utilities), following an exceptionally strong February.

The latest month's data lowered the Dodge Index to 139 (1996=100), down from 147 in February and a revised 151 in January. For all of 2000, the Dodge Index averaged 141, so 2001 has now included two months above the prior year's average and one month slightly below.

"The construction industry witnessed a healthy beginning to 2001, proving to be resilient against the backdrop of a slowing economy," stated Robert A. Murray, vice president of economic affairs for F. W. Dodge. "The March report shows activity settling back to a pace closer to what occurred during most of last year. There may be some concern that this represents the start of an extended decline, although it appears more likely that the construction industry is now in the process of leveling off near its 2000 volume."

Nonresidential building in March slipped 1% to $171.3 billion. Reduced contracting was present throughout most of the institutional sector, after a strong performance in January and February. School construction, the largest institutional category, was down 10% in March. Healthcare facilities slipped 3%, while larger declines were reported for churches, down 26%; courthouses and detention facilities, down 44%; and transportation terminals, down 45%.

The commercial side of the nonresidential market offered a mixed picture. Declines were posted for stores and shopping centers, down 11%; and hotels, down 31%. On the plus side, warehouses climbed 15%, while office construction advanced 17%. Supporting the March increase for offices were the following -- a $165 million office complex in San Francisco and a $43 million project in San Jose. The nonresidential total was also boosted by strong improvement for the long-depressed manufacturing plant category, which jumped 99% in March. Aiding the manufacturing upturn were two large projects in Oklahoma -- a $600 million truck manufacturing plant and a $200 million optical fiber plant.

Residential building, at $205.4 billion, was also down 1% in March. Single family housing eased back 1%, while the smaller multifamily segment was down 4%. The single family dollar amount was just 2% below the average pace for 2000, depicting a housing market that so far has seen only a very mild loss of momentum. By geography, March revealed this pattern for residential building -- the West, up 11%; the South Atlantic, down 3%; the South Central, down 5%; the Midwest, down 8%; and the Northeast, down 10%.

Non-building construction plunged 18% in March to $86.2 billion, following the robust volume reported in February. Most of the public works categories witnessed reduced contracting, including: highways, down 12%; water supply systems, down 35%; river/harbor development work, down 40%; and sewers, down 53%. Running counter to this trend were gains of 20% for bridges and 23% for miscellaneous public works projects, which includes mass transit work and outdoor sports stadiums. Electric utility construction also experienced a sharp decline in February, falling 55% after the brisk activity of the previous two months. Murray indicated, "The construction start figures for public works and electric utilities are often volatile on a month-to-month basis, so not too much should be read into the sharp declines for March. A better sense of this market is provided by looking at the construction volume for the first quarter of 2001, which came in 4% above the prior three months."

During the January-March period of 2001, total construction on an unadjusted basis was essentially unchanged from the same period of 2000. By major sector, non-building construction posted a 12% increase, while residential and nonresidential building trailed their 2000 levels by 1% and 5%, respectively. In terms of geography, total construction showed this pattern during the first three months of 2001 -- the West, up 7%; the South Central, up 4%; the Midwest, down 2%; the Northeast, down 3%; and the South Atlantic, down 7%.