Plumbing and Mechanical

Construction Holds Steady in July and for Year to Date<br>But Nonresidential Private Building Continues Slide

September 6, 2002
“A record amount of single-family homebuilding plus an uptick in public construction enabled overall construction to stabilize in July despite another drop in private nonresidential building,” said Kenneth D. Simonson, Chief Economist for Associated General Contractors of America (AGC), the nation’s leading construction trade association. Simonson was commenting on the Census Bureau’s release this morning of July data and revised June and May numbers on the value of construction put in place.

“The total value of construction put in place in July, $834 billion seasonally adjusted at annual rate, was level with the upwardly revised June figure and just 1.1% below the July 2001 number. The year-to-date total virtually matched the first seven months of 2001. Nevertheless, most construction other than single-family housing is still in a slump compared to its peak,” Simonson said. “While single-family housing was up by 0.4% for the month and by nearly 5% compared to last July, multi-unit housing has slipped 7% from its high in January. Private nonresidential building construction is off by 2% for the month, 10% for the past three months, and 20% for the past 12. Public construction has been almost flat since March but it is down 7.5% since peaking in February.

“It was heartening to see that year-to-date construction has stayed even with 2001,” Simonson added. “But I remain concerned about the rest of 2002. I think housing is likely to level off. Private nonresidential construction is unlikely to expand until the economy shows more robust and sustained growth, and public construction is facing further cuts as federal and state budget numbers keep getting more dismal.

“There are a few rays of sunshine in the clouds ahead,” Simonson noted. “Spiraling health-care spending by individuals, employers and governments will continue to mean more public and private construction for hospitals, clinics and doctors’ offices, manufacturing and research facilities for drugs and medical devices, and even drug stores. The Census Bureau’s totals for both private and state-local health care construction were up by 17% and 23% from July 2001 to July 2002, and I expect coming months’ figures to remain strong.

“The high level of new-vehicle sales should keep automotive commercial construction booming. That category was up 9% from July 2001 to July 2002. And home-related retail construction categories, such as landscaping, home-improvement and furniture stores, should outperform other types of retail in the next few months.”

(The Census report for July is at www.census.gov/const/www/c30index.html. In addition, Census has posted more detailed data, classified by end user, at www.census.gov/pub/const/C30/newtc.html.)