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Commercial building lags behind other sectors in Jan.

A one percent setback in 1992's opening month left the seasonally adiusted Dodge Index of construction contract value at 95, one point short of its best value in the past year and a half. This leading indicator of spending for ongoing construction, which now uses 1987 as its 100 base, has shown modest but steady improvement since early in 1991.

"A stubbornly depressed nonresidential building market is keeping the construction sector from realizing its full potential," said George A. Christie, vice president and chief economist for F.W. Dodge. "Even after the long recession, lingering weakness in commercial and industrial building is offsetting very substantial gains in one family housing and public works construction."

"Call 1992 a |Two-H Year'," Christie said. "Homebuilding and highways are where the action is."

January's value of total residential building continued its steady climb with a solid 11 percent advance over December's rate of contracting. The year-long recovery of the housing market has lifted the current rate of residential building 40 percent above the January 1991 low. All of that improvement has been in single family building.

"Favorable interest rates and the prospect of a tax credit for first time home buyers will keep the one family housing recovery going through 1992 even though the overdeveloped rental/condo market remains dormant," the Dodge economist said.

Contracting for public works construction, which surged to an alltime high in December, held within two percent of that record rate in January. Support for public works construction is developing through two sources: accelerated spending of appropriations for existing public construction programs, which will give the economy a needed boost, and the newly passed $150-plus billion highway program, which will greatly escalate the development of the nation's transportation network.

Contracting for non-residential buildings fell back 12 percent in January after showing a hint of improvement in the previous month.

"Although 1991 gave us two or three encouraging months, it is evident that commercial building is far from ready for a sustained recovery," Christie said.

On an unadjusted basis, January's contracting for new construction, at $16.1 billion, exceeded the weak year-ago value by 14 percent. All regions reported double-digit gains except the West, where contracting declined 2 percent from last January's total.
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Title Annotation:January 1992 Dodge Index of construction contracts shows depression in nonresidential building market
Publication:Real Estate Weekly
Date:Mar 11, 1992
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