September Construction Contracting Rises 5%
"September's rebound is likely just a brief departure from a more general downward trend, but it does indicate that the loss of momentum for construction continues to be moderate," stated Robert A. Murray, vice president of economic affairs for Dodge. "Through much of 2001, the strength shown by public works and electric utilities has offset decreased activity by other sectors of the construction industry, and this pattern was repeated in September. At the same time, this balancing role will be more difficult to maintain in the coming months. Commercial building is expected to see further declines, and housing is only at the beginning of its period of reduced contracting."
Nonbuilding construction in September jumped 24% to $127.2 billion. A sharp 78% increase for electric power plants was partly responsible for the exceptional nonbuilding amount in September. Eight power plant projects valued each at greater than $100 million were started, located in these states: Arizona ($650 million), Indiana ($560 million), Texas ($350 million and $300 million), Illinois ($305 million and $140 million), Pennsylvania ($155 million), and Florida ($120 million).
Murray noted, "Power plant construction continues to boom in 2001, marking the fourth straight year of substantial growth. There's emerging concern, however, that this surge of plant construction in combination with slowing demand may soon lead to an oversupply of generating capacity." Nonresidential building, at $160.6 billion, increased 7% in September. School construction continued to be brisk, rising 11%. Other institutional categories showing September gains were transportation terminals, up 57% with the help of $175 million airline terminal project in Houston; public buildings (courthouses and detention facilities), up 18%; and religious buildings, up 6%. Reduced contracting was reported for health care facilities, down 1%; and amusement and recreational projects, down 3%.
The commercial categories were mixed. Hotel construction rebounded 19% from a weak August, buoyed by the start of $197 million hotel in Grapevine, TX (part of a $310 million convention center complex). Stores and shopping centers climbed 9%, while warehouses were up 2%. Office construction, however, was down 13 %. Murray stated, "Weakening office employment and rising office vacancy rates mean that the retrenchment for office construction will be present well into 2002." September's nonresidential total received an unexpected boost from manufacturing plant construction, which increased 15% from a very weak August.
By geography, total construction showed this performance during the January-September period—the South Central, up 7%; the West, up 5%; the Midwest, up 3%; the South Atlantic, down 1%; and the Northeast, down 3%.