F. W. Dodge Group’s September Report : New Construction Off for 3rd Month

New construction contracting fell 3% in September, pulled down by a decline in commercial and industrial projects, a business research concern reported Monday.

It was the third consecutive monthly decline in total new construction starts, now valued at $238 billion on an annualized basis, according to the F. W. Dodge Group of McGraw-Hill Information Services Co.

The latest month’s decline was concentrated in commercial and industrial projects, the report said.

George A. Christie, a McGraw-Hill economist, said continuing vacancies in commercial buildings and an overall reduction in public spending had reversed a five-year expansion of building activity. Christie predicted that the downward trend in new contracting would continue.

“Newly started construction is on its way to a 3% decline in 1988, with the prospect of a further dip next year,” he said.

Christie said a seasonally adjusted 7% dip in non-residential building in September seemed inconsistent with 1988’s surge in manufacturing.

Market fundamentals indicate that industrial plant construction should be up sharply, given a capacity utilization of 84% in U.S. factories, he said.

“Instead, contracting so far in 1988 is running 10% behind last year,” he said.

Residential construction, meanwhile, remained at an annual rate of $115.7 billion in September, unchanged from the previous month, due in part to relatively stable mortgage interest rates.

Unchanged in West

The value of contracts for non-building construction, such as public works and utilities, increased 1% to an annualized rate of $40.1 billion last month, the report said. An increase in highway and other public works construction was partially offset by a decline in utility projects.

For the first nine months, new construction starts on an unadjusted basis totaled $191.7 billion, down 3% from the same period in 1987.

The South has remained the weakest building sector, with 6% fewer construction starts than in 1987. The northeastern and north-central areas of the United States also showed declines, of 1% and 2%, respectively. Building in the nation’s Western region remained unchanged.