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Dodge: construction to grow 8% next year.

Total contracting for new construction in the United States is expected to grow by 8 percent next year to $267.3 billion, announced F.W. Dodge, a division of McGraw-Hill's Construction Information Group.

The recovery, expected to take a firmer hold this year stalled early on, drawing out the initial stage of recovery when compared to previous cyclical rebounds.

Single-family housing and public works -- in particular, highways, roads and bridges -- will again lead the nation's growth in construction. And, while there will be some signs of life in the commercial sector, it will remain bridled by the lingering effects of over-building in the 1980's and scarce credit.

"Commercial building will remain the problem sector of the industry throughout much of next year," said Robert A. Murray, vice president of economic affairs for F. W. Dodge, in a forecast address here for an audience of 500 of the nation's top building product executives.

As the nation continues to deal with the problems left in the wake of the 1980's, "several familiar limiting factors, such as credit availability and demographic influences indicate that 1993 will be a very different second year of recovery," said Murray.

The McGraw-Hill economist presented the forecast at the 53rd annual Building Products Executives Conference, a major forum for construction industry business leaders. The day's discussions of the outlook for the U.S. economy were hosted by McGraw-Hill's Construction Information Group. The group is widely known for its Dodge Reports on construction activity, Sweet's Catalog Files of building product information, and leading construction industry magazines.

"The outlook for next year's total construction comes down to how much the housing market can deliver," said Murray. "This recovery is like no other because of the unprecedented conditions wrought by the commercial banking sector and the shifting demographics nationwide. The bottom line is that there will be little contribution for near-term expansion from non-residential building."

Dodge expects that some of the deferred demand from the 1990-91 downturn, and now 1992's uneven rebound, will find its way to the construction site in 1993. Single-family housing is slated to grow to 1,050,000 units, a 9 percent gain over 1992. The strongest regional gains will likely be in the South Central, which has demonstrated consistent growth in recent years, and the South Atlantic, spurred by rebuilding in the wake of Hurricane Andrew.


"Unlike previous recoveries, this one won't see much of a second stage boost from the commercial categories," said Murray. For income properties, the problem of excess space will be persistent and further complicated by demographic weakness.


Manufacturing building will remain stalled at its current weak level for another year. Depending on the outcome of the November election, adoption of industrial policy positions could stimulate the category's revival beyond what would ordinarily occur.

Public Works

A promising portion of the industry's growth, public works should achieve nearly a double-digit gain next year. "A moderately improved 1993 economy should allow some measure of relief for state governments by the time their next fiscal year begins. Rising employment will expand the tax base while alleviating income maintenance payments, making possible a return to pre-recession priorities. "

Looking further ahead, Murray noted that as the current recovery unfolds over the next several years, it will differ from previous economic recovery cycles most notably in the time of turn-around. "We are looking at a slow and extended recovery in keeping with the slow growth 1990's," Murray said.
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Title Annotation:F.W. Dodge division of McGraw-Hill Information Services Co. issues report with prediction for construction industry in 1993
Publication:Real Estate Weekly
Date:Nov 11, 1992
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