Sluggish Economy Begins To Affect Construction

New construction starts in May dropped 2 percent to a seasonally adjusted annual rate of $460.8 billion, according to F.W. Dodge. Both nonresidential building and housing experienced a loss of momentum that was partially offset by continued expansion for public works and a surge of new power plant projects.

May's data lowered the Dodge Index to 139 (1996 = 100), down from a revised 142 for May. During the first two months of 2001, the Dodge Index averaged 150, but the subsequent three months have seen contracting hover around last year's average reading for the Index at 142. "At the outset of 2001, nonresidential building witnessed only a mild retreat, but its recent slide indicates that the sluggish economy and tighter bank lending standards are now exerting a more discernable dampening on this sector," stated Robert A. Murray, vice president of economic affairs for F.W. Dodge. "At the same time, housing has held up reasonably well, and both public works and electric utility construction are maintaining their upward trend for the prior year."

Nonresidential building in May dropped 9 percent to 151.4 billion.

Residential building dropped 6 percent in May to $204.5 billion.

Nonbuilding construction in May climbed 21 percent to $105.0 billion.Most responsible for the increase was a surge for electric utility construction, with five large power plants reaching the groundbreaking stage in May.