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Construction activity volatile, but recovering.

Contracting for new construction in March fell 9 percent from February's spike to a more sustainable level, according to the F.W. Dodge division of McGraw-Hill's Construction Information Group.

In the latest month, the seasonally adjusted Dodge Index of construction contract value retreated to 94 (1987=100) after soaring to 103 in February.

"The March reading is consistent with a recovering industry, but hardly one that is booming as February's index improperly implied," said George A. Christie, vice president and chief economist for F.W. Dodge.

"Taken as a whole, the opening three months of 1992 brought the fourth in a series of small but steady quarterly gains," he said. "Current data clearly support that the year-long recovery of the construction sector is continuing."

At the end of three months, the unadjusted 1992 total of newly started construction of all kinds, at $54.2 billion, was 18 percent greater than the value reported in the same period in 1991. Housing, ahead by 35 percent so far this year, and "nonbuilding" construction (public works and utilities), up 24 percent for the quarter, were the sources of 1992's yearto-date improvement. Nonresidential building remained 7 percent behind last year's first quarter total due to the still-depressed commercial real estate market.

Contracting for nonresidential buildings, which soared briefly in February, fell just as sharply in March (-16 percent).

"A bunching of several commercial building projects, along with February's generous seasonal adjustment factor, produced the February spike. March's lower rate of contracting was more in line with reality," said Christie.

March contracts for residential buildings and for nonbuilding construction, both down 5 percent after seasonal adjustment, were nevertheless weil ahead of last year's depressed levels. Lower mortgage rates, in the case of housing, and a new and much expanded highway program are two good reasons to expect continued strength in these categories.

At the close of 1992's first quarter, all five major regions of the nation showed substantial improvement over the last year's construction activity. The largest percentage gains were reported in the Northeast (plus 20 percent), the North Central (plus 29 percent) and the South Central (plus 18 percent). Below average gains were confined to the West (plus 10 percent) and the South Atlantic (plus 7 percent).
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Publication:Real Estate Weekly
Date:May 6, 1992
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