October construction drops 4 percent

New construction starts in October fell 4 percent to a seasonally adjusted annual rate of $601.8 billion, according to a Nov. 29 report from McGraw-Hill Construction, a division of The McGraw Hill Cos.

Moderate declines compared to September were reported for each of the construction industry’s three main sectors: nonresidential building, residential building and nonbuilding construction. Through the first 10 months of 2006, total construction on an unadjusted basis came to $567.4 billion, up 0.5 percent compared to last year.

The October statistics produced a reading of 127 for the Dodge Index, down from a revised 132 for September. The index equaled 100 in the year 2000. The pace of construction starts has slowed markedly in recent months—the Dodge Index averaged 146 during the first half of 2006, but during the next four months the index averaged 132, a decline of 10 percent.

“The primary reason for this year’s slowing pace of construction starts has been the sharp pullback by single-family housing,” said Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction, in the report. “Meanwhile, nonresidential building and public works were holding up well, partially offsetting the downturn for single family housing.

“However, in October, nonresidential building and public works were not able to provide the same support as before, and the result was the weakest pace for construction starts so far in 2006. It’s expected that nonresidential building and public works will at least stabilize in the closing months of 2006, which will help cushion the retreat still underway for total construction activity.”

Nonresidential building in October decreased 4 percent to an annual rate of $188.7 billion. Reduced contracting was reported for the two largest structure types: educational buildings, down 12 percent, and healthcare facilities, down 36 percent. In both cases, the declines were relative to strong activity in September.

A number of nonresidential structure types posted October gains. Office construction grew 15 percent, as large projects reached groundbreaking in San Francisco, $232 million; Harrisburg, Pa.; $100 million; and Boston, $96 million. Store construction climbed 7 percent, aided by the start of a $130 million retail project in Atlanta.