"The construction industry continues to hover around its average pace for the previous year, with August slightly above and September slightly below that pace," stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. "Single family housing remains at a high level, offsetting the prolonged weakness being experienced by commercial building. The institutional building categories have stayed strong for much of 2002, although their loss of momentum in September suggests that tighter fiscal conditions at the state level are beginning to have a dampening impact. The public works categories have also held up fairly well to this point, but they too are expected to see some loss of momentum in the coming months."
Nonresidential building in September fell 12% to $134.1 billion. School construction, the largest nonresidential category by dollar amount, registered a 19% drop following a strong August. "After achieving a record high in 2001, school construction has stayed at an elevated level for most of 2002, but September's downturn may be a sign that contracting may not be quite as brisk in the months ahead," noted Murray. Other institutional categories showing declines in September were: amusement-related projects, down 39%; transportation terminals, down 5%; and healthcare facilities, down 2%. An 18% gain was reported for public buildings, boosted by the start of a $125 million prison in Illinois. Church construction was also up in September, rising 29%.
The commercial side of the nonresidential market in September registered generally reduced contracting. Declines were reported for offices, down 14%; warehouses, down 15%; and hotels, down 23%. "Offices, warehouses, and hotels are the nonresidential categories showing the most weakness over the past two years, and the September declines are consistent with that pattern," noted Murray. Stores and shopping centers, rising 4%, continued to be resilient compared to the depressed activity shown by the other commercial structure types. September also witnessed further weakening for manufacturing plant construction, which fell 14%.
During the first nine months of 2002, the steady performance for total construction was the result of this behavior by major sector—residential building, up 10%; nonbuilding construction, down 2%; and nonresidential building, down 11 %. By region, total construction in the January to September period was the following—the South Atlantic, up 6%; the Northeast, up 5%; the West, up 1%; the Midwest, down 1%, and the South Central, down 9%.