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Contracting climbs 6% in Feb. for new projects.

Recovery of the construction industry picked up momentum in February as contracting for new projects rose 6 percent, it was reported by McGraw-Hill's F. W. Dodge Division. The latest month's advance extended a "saw-toothed" recovery of construction contracting that began early in 1991.

February gains in all three broad categories of construction --housing, nonresidential building, and public works/utilities -- brought the Dodge Index of total construction contracting back to 100, a level that hasn't been reached in more than a year and a half.

"This is more evidence that the economy has turned the corner," said George A. Christie, vice president and chief economist for McGraw-Hill's Construction Information Group. "Construction contracting is now almost 15 percent above last year's average level. As this higher volume of newly started work is brought to completion over the months ahead, jobs in construction and outlays for building products are bound to rise, "he predicted.

Non-residential building, with a 12 percent gain, was February's pacesetter as contracting for commercial and institutional buildings rebounded from January's setback. Educational and health care facilities showed better-than-average gains, although the commercial real estate market's problem areas, offices and hotels, failed to participate in February's otherwise general advance.

The year-long rise of residential building continued through February with another 3 percent gain. As before, improvement was concentrated in single-family housing where the elements of affordability--sales price and financing costs -- are particularly favorable.

Christie cautioned that, "Seasonal adjustment of housing data in the winter months is less than reliable, and could be making good housing numbers look even stronger than they really are. We'll have a better fix on this situation soon."

With building up in all regions of the country, this year's biggest housing gains are found in the North Central and South Central areas.

During the past several months, contracting for nonbuilding construction (public works and utilities) has added a secondary level of support in addition to the recovery of the housing market. Acceleration of Federal spending for ongoing public worl s programs and the implementation of the new six-year, $155 billion transportation act (ISTEA) have escalated the large public works component of this category since December. In February, when contracting for public works projects steadied, a spurt of electric utility projects helped boost total nonbuilding construction contracting another 4 percent.

At the end of two months, the unadjusted total of 1992 contracting for new construction, at $33 billion, was 16 percent ahead of 1991's value for the same period. The South Central region, where contracting was up 18 percent, was closest to the national average. The Northeast and North Central regions, with gains of 24 percent and 30 percent respectively, showed the biggest improvement, while the South Atlantic and the West, up 7 percent and 6 percent, lagged.
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Publication:Real Estate Weekly
Article Type:Industry Overview
Date:Apr 8, 1992
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