August construction starts up slightly; mixed bag for public works sector

News McGraw-Hill Cos. October 07, 2003
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New construction starts in August retreated 1% to a seasonally adjusted annual rate of $514

New construction starts in August retreated 1% to a seasonally adjusted annual rate of $514.2 billion, according to McGraw-Hill Construction Dodge, a division of The McGraw-Hill Cos. The housing sector stayed robust, but a slight drop for nonresidential building plus a more substantial decline for nonbuilding construction (highways and bridges) outweighed its August gain. During the first eight months of 2003, total construction was reported to be essentially even with the same period of 2002.

The August data brought the Dodge Index to 155, down from revised readings of 157 for July and 163 for June. During the first five months of 2003, the Dodge Index had averaged 149.

"While new construction starts have settled back from a very strong June, August still represents a reasonably healthy month compared to what was reported earlier in the year," stated Robert Murray, vice president of economic affairs for McGraw-Hill Construction Dodge. "The housing market continues to be robust, and commercial building seems to be stabilizing following the extended declines witnessed a year ago. At the same time, budget pressures are now having some dampening impact on both institutional building and public works."

Nonbuilding construction in August fell 12% to $78.7 billion. The highway category registered reduced activity in August, with construction starts down 18% relative to July. Bridge construction, however, was up 20%.

"Highway construction showed steady growth from 1999 through 2002, but it now appears that 2003 will see a moderate decline, as the first eight months of this year are down 6% from the same period of 2002. This is the result of slightly less funding coming from the federal-aid highway program for fiscal 2003, plus spending restraint by the states as they deal with tight budget conditions."

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