November Construction Declines 3%
"The November figures point towards a construction industry that continues to settle back gradually from its heightened performance at the outset of 2001 ," stated Robert A. Murray, vice president of economic affairs for Dodge. "It's important to note that the loss of momentum for total construction has been very mild, as a result of an offsetting pattern by the industry's major sectors. When commercial building declined during the first half of 2001, some of the shortfall was picked up by high level activity for housing, public works, and power plants. Housing and public works now appear to be slipping back, but the institutional building sector, namely school construction, continues to be strong."
Nonbuilding construction, at $91.1 billion, fell 18% in November. A 30% decline was reported for public works (highways, bridges, sewers, water supply systems, etc.), although it should be noted that this sector is subject to occasional volatility on a month-by-month basis.
The public works average for August, September, and October was 14% above the average level for all of 2000, so November should be viewed as a "correction" that brings public works more in line with the 6% increase reported by this sector during the first eleven months of 2001.
Murray stated, "The public works market is still on track to post a 6 to 7% gain for the full year 2001, even with November's weak level of construction starts."
Electric utility construction was very strong in November, rising 21%. Seven major power plant projects were started during the month, located in these states: Nevada ($600M), Maryland ($380M), Ohio ($340M), Florida (two projects valued each at $250M), New Mexico ($250M), and Washington state ($200M). Nonresidential building in November grew 10% to $184.5 billion. The institutional side of the nonresidential market was very strong, featuring these increases: schools, up 32%; public buildings (courthouses and detention facilities), up 23%; healthcare facilities, up 22%; and amusement-related projects, up 14%.
"School construction continues to be one of the 'stars' for the construction industry, and the full year 2001 will establish a new record high," Murray stated. "The surge is being supported by the greater amount of construction bond measures passed by the states in recent years; at the same time, the growing fiscal weakness of the states will make it more difficult for school construction to see further increases." On the commercial side, November showed a mixed pattern. Declines were reported for warehouses, down 8%; and hotels, down 36%. Gains were reported for stores and shopping centers, up 9%; and office buildings, up 26%.
The office category was boosted by the start of a $700M segment of the reconstruction effort for the Pentagon in Washington, DC. The nonresidential total in November was also helped by a 48% increase for manufacturing plant construction, after a very weak October.
During the first 11 months of 2001, total construction on an unadjusted basis advanced 3% compared to the prior year. Greater contracting was reported for residential building, up 4%, and nonbuilding construction, up 13%; although nonresidential building trailed its 2000 amount by 4%. On a geographical basis, total construction showed the largest increase in the South Central region, up 5%; followed by the Midwest, up 4%; the West, up 3%; and the South Atlantic, up 2%. The Northeast was the only region in the January-November period to come in below its 2000 level, declining 2%.