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Dec. construction gains bring up 1991 average.

Dec. construction gains bring up 1991 average

December's 2 percent gain in the value of newly started construction nudged the fourth quarter's rate of construction contracting to its highest level in 1991, for an annual total of $226.8 billion, it was reported by the F. W. Dodge Division of McGraw-Hill's Construction Information Group.

The seasonally adjusted Dodge Index of construction contract value, which uses 1982 as its 100 base, climbed to 148 in last year's final month after slipping back to 145 in November. Averaging 148 for the closing quarter as a whole, the Index barely topped the third quarter's 147.

"The year-long recovery of the depressed construction sector was in danger of stalling out in the closing months of 1991 when home building leveled off after regaining the one million unit rate," said George A. Christie, vice president and chief economist or F. W. Dodge. "Two December events - the Fed's full point cut of its discount rate and the enactment of the new six year transportation program - should help to restore construction's momentum by Spring."

December's small gain did little more than recoup some of the losses of the previous month when contracting declined 4 percent. Nonresidential building rebounded 3 percent in December as strength in institutional building offset continued weakness in commercial projects. Housing was essentially flat in the final month of 1991, but public works construction rose 4 percent with double digit gains in highway and water supply projects.

Christie noted that, "It's quite possible that there's been an acceleration of spending through existing public works program in an attempt to give the economy a lift."

Despite quarter-by-quarter improvement through 1991, the year's total of new construction starts, at $226.8 billion, fell short of 1990's value by 8 percent. It was the second yearly decline since construction contracting reached its peak of $271.2 billion in 1989.

Non-residential building, down 11 percent in 1991, was again the weakest of the three broad categories. The value of residential building fell 8 percent last year as the number of housing units hovered around one million, the lowest number in four decades. Contracting for "nonbuilding" construction public works and utilities) eased back 2 percent in 1991.

Regional exceptions to the national decline of 8 percent last year were the South Central, where contracting was up 4 percent, and the West, where a heavy cutback of residential building led to an overall 14 percent decline. The Northeast, down 7 percent, the North Central, down 8 percent, and the South Atlantic, down 8 percent, were more typical of 1991's circumstances.
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Publication:Real Estate Weekly
Date:Feb 5, 1992
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