Steady Signs of Activity

While paving contractors and their suppliers are still awaiting congressional approval of a new highway bill (See "Closed Access Road," Commodities department, pg. 6 of this issue), most other construction industry sectors are enjoying relatively good health into the second half of 2004.

Figures compiled by the McGraw-Hill Construction division of the McGraw-Hill Companies are showing steady figures for new construction contracts in the first four months of the year.

Total construction for the month of April was reported at a seasonally adjusted annual rate of $545.4 billion. April featured a modest decline for residential building, offset by small gains for nonresidential building and public works spending.

"The construction industry continues to move at a healthy clip, supported by the strong amount of single-family homebuilding," says Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. "To a small degree, April witnessed the broad pattern that’s expected to be present during 2004: Single-family housing settling back from an exceptionally high volume, while nonresidential building registered modest improvement. The prospects for the public works sector are less certain during 2004, as the next federal transportation bill still awaits passage, but at least April showed modest strengthening after the weak activity during 2004’s first three months."

Rising mortgage rates in May could finally begin scaling back single-family home-
building activity in the second half of 2004. Multi-family housing, according to the McGraw-Hill numbers, continues to be supported by a growing volume of condominium and other large multi-family projects, with the Western U.S. market showing noticeable strength and the Northeast market lagging.

Commercial, industrial and institutional non-residential building activity, at $149.1 billion, was up 2 percent in April. The retail, warehouse and health care categories are showing the strongest growth trends in this sector. Manufacturing plant construction remains depressed, the McGraw-Hill figures reveal.

The infrastructure or public works contract value totals edged up in April, with several large-scale water and sewer projects leading the way. Highway and bridge construction contract values remain modest, however.

"Since Congress has yet to approve the next multi-year transportation bill, state departments of transportation continue to face uncertainty regarding future funding levels, making it more difficult to proceed with major new projects," Murray remarks.

Over the first four months of 2004, total construction on an unadjusted basis was up 9 percent compared to the same period in 2003.

By geography, total construction in the first four months of 2004 showed the following pattern: the South Atlantic, up 18 percent; the Midwest, up 9 percent; the South Central, up 6 percent; the West, up 5 percent; and the Northeast, up 3 percent.