August Construction Drops 1 Percent
New construction starts in August retreated 1 percent to a seasonally adjusted annual rate of $514.2 billion, according to McGraw Hill Construction Dodge, a division of the McGraw-Hill Companies. During the first eight months of 2003, total construction was essentially even with the same period of 2002.
“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,” said Robert Murray, vice president of economic affairs for MHCD. “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.”
Residential building increased 2 percent in August to $286 billion. Single-family housing was up a slight 1 percent, its strongest pace so far in 2003, while multi-family housing jumped 7 percent. Although the cost of financing increased, with the 30-year fixed mortgage rate reaching 6.4 percent at the end of the month, there was little negative effect on homebuyer demand of construction.
Nonresidential building dropped 1 percent to $149.6 billion. The educational building category dropped 15 percent from an elevated July, returning to a level equal to its average pace during 2002.
Nonbuilding construction plunged 12 percent in August to $787.7 billion, primarily because of a sharp downturn for electric utilities, which slid 86 percent month-over-month, following an unusually strong volume of power plant starts in June and July. The highway category also declined 18 percent in August. Highway spending is down 6 percent year over year in the first eight months of 2003, “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,” said Murray.