June Construction Starts Jump 9 Percent

New construction starts increased 9 percent in June to a seasonally adjusted annual rate of $529.5 billion, according to McGraw-Hill Construction Dodge, a division of the McGraw Hill Companies. However, during the first six months of 2003, total construction on an unadjusted basis was reported at $252.8 billion, a 2 percent drop from the same period last year.

“The sharp growth in June reflected some catching up by nonresidential building and public works, as well as the boost coming from the start of three very large power plants,” said Robert Murray, vice president of economic affairs for MHCD. “A number of factors led to the deferral of some construction projects in the early months of 2003. These included the uncertainty that preceded the start of the Iraq war, the delayed passage of federal appropriations for fiscal 2003, and a general sense of caution arising from the fragile economy itself.”

Murray was cautious in his optimism, however. “Because some of the strength for construction in June came from projects that had been previously deferred, it’s expected that the heightened contracting will settle back in coming months.”

The critical nonresidential building sector jumped 10 percent in June to $158.6 billion, paced by 30 percent boosts in office construction and small hotels. The retail sector, however, weakened, with store construction dropping 6 percent, warehouses down 20 percent, and manufacturing plants plunging 8 percent.

Despite the June gain, nonresidential building for the first half of 2003 was down 8 percent year over year.

Nonbuilding construction leaped 29 percent to $106.8 billion in June, with a 277 percent jump in new electric utility starts. Without the three major power plant projects – in Wisconsin, Virginia and Nebraska – nonbuilding construction would be up 14 percent in June and total construction up 6 percent.

Highway construction increased 35 percent in June. While the highway sector has lagged in 2003, fiscal 2003 appropriations passed in February are driving road projects toward the starting point.

Even with a strong June, nonbuilding construction for the first half of ’03 dropped 17 percent year over year.

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