At a seasonally adjusted annual rate of $512.9 billion, new construction starts in July slipped 4% from a very strong June, according to McGraw-Hill Construction Dodge, a division of The McGraw-Hill Companies. Both nonresidential building and housing were down slightly, while a more substantial decline was reported for nonbuilding construction (public words and electric utilities). Through the first seven months of 2003, total construction activity was 1% below the same period a year ago.

In July, nonresidential building retreated 1% to 154.9 billion, reflecting a mix of pluses and minuses among the various structure types. On the plus side, school construction (the largest nonresidential category by dollar volume) jumped 12%. Pushing the educational category upward were the start of several large senior high schools in Texas, California, and Illinois, plus a $100 million museum expansion in Washington, DC. According to Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction Dodge, “While school construction has eased back from its record high in 2001, the volume contrinues to be generally strong, withstanding for the moment, any dampening arising from tight state fiscal conditions.”

Health care facilities rebounded 22% after a weak June, aided by the start of a $200 million hospital in Chicago. Warehouses, up 44%, also rebounded from a weak June, while hotel construction increased 54% with the help of a $135 million convention center-related hotel in Denver.

On the negative side, store construction slipped back 1% from its elevated performance of the previous two months, even with the July start of an $80 million mall in Pittsburgh. Office construction retreated 25%, continuing its up-and-down pattern of recent months, and once again showing that sustained improvement is at least several quarters away. The smaller institutional project types in July also showed weakening — churches, down 3%; public buildings (courthouses and prisons) down 19%; amusement-related projects, down 22%; a transportation terminals, down 46%. Manufacturing plant construction remained very depressed in July, plunging 29%.

Nonbuilding construction dropped in July 15% to $90.2 billion. This followed a 29% increase in June, which featured widespread gains as projects that had been held back earlier in the year reached the construction start stage. The pace for nonbuilding construction in July was still 6% above the average for the January-May period.

Following a very strong June, contracting for electric utilities in July slipped back 9%, while remaining well above the levels reported in the first five months of the year. July included the start of three major projects: a $600 million power plant in Florida, a $230 million power plant in California, and a $200 million wind farm in Colorado. Murray said, “Even with the comparatively high levels of new power plant starts in June and July, the broad trend for power plant construction continues to be downward, following the record high achieved in 2001. However, there’s still a substantial need to upgrade transmission lines, as highlighted by the recent blackout in the Northeast.”

By major region, total construction in the January-July period performed as follows: the West, up 5%; the South Central, up 3%; the South Atlantic, up 2%; the Midwest, down 1%; and the Northeast, down 18%.