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New construction contracts recede again.

Falling for the second consecutive month, new construction contracts dropped 3 percent in March, according to the F.W. Dodge Division of McGraw-Hill. The latest month's data lowered the seasonally adjusted Dodge Index to 94 (1987= 100), down from February's 97 and January's 102.

A reduced volume of housing activity led to March's overall retreat, reflecting that month's harsh winter weather. Meanwhile, nonresidential building held close to its February amount and. nonbuilding construction (public works and utilities) showed modest improvement. Daring the opening quarter of 1993, construction contracting dwindled slightly, averaging 2 percent less than its resurgent 1992 fourth quarter rate. Contracting was still 3 percent above the weakened pace reported in last year's second and third quarters.

"Given the weather conditions, the decline in March came as no surprise," said Robert A. Murray, vice president of economic affairs for Dodge. "At the moment, the best description for the construction recovery is that it is still 'on hold.' Single family housing, having lost some momentum this year, remains the key to the industry's near term expansion. Its performance during the next month or two under more normal conditions bears watching, since a stronger response to this year's lower mortgage rates is needed to recharge the recovery."

Residential construction dropped 8 percent in March. The Northeast, with a 24 percent plunge in the value of residential starts, clearly showed the impact of the Blizzard of '93; other regions revealed more moderate declines. "With fixed mortgage rates now at 7.5 percent, the lowest since 1973, at least the stage has been set for a housing rebound this spring," said Murray.

Non-residential building in March cased back 1 percent, due to offsetting behavior of its various categories. Following a particularly strong volume in February, educational building returned to a more sustainable pace; this in turn led to a slight 3 percent drop for the institutional sector. Store construction showed stability at its heightened amount of recent months, while offices remained at a very weak volume. Although still depressed, manufacturing building registered a strong gain in March.

Non-building construction advanced 4 percent over the previous month. Highways and water supply systems provided much of the upward impetus, as did a rebound for utility projects from an unusually weak February. According to Murray, "transportation-related public works remains one segment of the construction industry expected to advance this year. But its potential for growth was diminished recently with the defeat of Clinton's economic stimulus package by the Senate filibuster."

At the end of the 1993's first three months, unadjusted total construction contract value was off 2 percent from the same period a year ago. Geographically, three regions of the country posted substantially lower activity --the West, down 11 percent; the North Central, down 10 percent; and the Northeast, down 9 percent. In contrast, both the South Atlantic and South Central regions, with respective gains of 13 and 9 percent, came out ahead in 1993's first quarter from a year ago.
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Title Annotation:report from F.W. Dodge Division for March 1993
Publication:Real Estate Weekly
Date:May 5, 1993
Words:495
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