New Construction Down 3%; Commercial Sector Blamed

Contracts for new construction dropped 3% in March, weakened by a sharp decline in commercial and industrial building, according to a survey released Monday.

The survey, conducted by the F. W. Dodge division of McGraw-Hill Information Systems Co., showed that the value of new construction contracts on a seasonally adjusted, annualized basis fell to $242.4 billion in March from $249.7 billion in February.

“With the usual winter volatility out of the way, March contracting data showed that 1988 construction activity is beginning to settle into a credible pattern as housing firmed and commercial building weakened,” said George A. Christie, F. W. Dodge vice president and chief economist.

“We can look for some temporary improvement of housing starts in the months ahead as buyers become aware that mortgage rates won’t be going any lower for a while.”

On the other hand, Christie said, commercial building faces the prospect of an extended decline as the surplus of office space is gradually absorbed.

Contracting in March for commercial and industrial projects dropped 19% from a month earlier, although institutional building rose 14%, the survey showed.

The value of newly started residential buildings declined 2%. Starts of single-family homes reached their highest rate so far this year, but declines in apartment and hotel-motel projects more than offset the modest improvement in single-family building, F. W. Dodge said.

Contracts for nonbuilding construction--mainly public works and utilities--edged up 1% in March. Highway construction rebounded after several sluggish months, but March contracts for waste water treatment plants declined, leaving the total value of public works contracts virtually unchanged from February.