Construction contracting suffered in 2nd quarter.

The 7 percent decline of contracting for new construction projects in May is evidence that the building industry's yearlong recovery has stalled, according to the F. W. Dodge Division of McGraw-Hill's Construction Information Group.

A sharp drop in commercial building brought the seasonally-adjusted Dodge Index to 86 in May (1987 = 100), its lowest value so far this year. The latest month's setback for newly-started construction, following a lackluster April, means that the succession of consecutive quarterly gains which began in the Spring of 1991 has been interrupted in this year's second quarter.

"With single family home building almost back to normal, continued improvement in the construction sector depends heavily on nonresidential work where commercial real estate development is at a virtual standstill in many parts of the country", said George A. Christie, vice president and chief economist for F. W. Dodge. "Unless we get a 'second effort' from the housing market, we could be looking at a plateau of total construction contracting for the rest of 1992."

May contracts for non-residential building fell 13 percent, the result of a steep drop of commercial development coupled with a nominal decline of institutional building. The value of residential building held steady in May, while newly started public works projects edged up 2 percent.

At the end of five months, this year's strong early lead over 1991 contracting dwindled to 4 percent. The North Central region, still holding a 13 percent year-to-date improvement, is the exception.