Construction climbs despite setbacks
By Staff -- Industrial Distribution, 11/1/1998
Newton, Mass.--Construction throughout the U.S. continues its steady upward climb, despite some recent sharp declines in specific industry sectors.Although the value of new construction contracts fell five percent in August, according to a report by the F.W. Dodge Division of the McGraw-Hill Companies, total construction (on an unadjusted basis) during the first eight months of 1998 was up one percent over the same period a year ago.
The Dodge Index, a measure of national construction value, fell to 135 in August from a revised 143 in July, and 141 in 1997. The index uses 1992 as a base year of 100.
A look at individual sectors -- the seven percent decrease in residential building in August, a 32 percent fall in manufacturing plant construction, and the 15 percent decline in office construction -- could lead to the conclusion that rough times are ahead for the construction industry. But most construction distributors are too busy meeting current demand to pay much attention to such numbers.
Despite signs of a slowdown, Morrie Halvorsen, executive director for the Specialty Tools & Fasteners Distributors Assn., sees no reason for pessimism.
"They're going to scale some things back, but on the plus side the interest rate has gone down, so that should be a huge plus for construction. We expect the construction market to be at least as good next year as this," Halvorsen says.
"Everything is moving along about like it has been," says Dave Kalous, vice president and owner of K-Bar-K Power Distribution Group, Inc., in Dallas, Tex. "With all the news reports and the media trying to shake us up and convince us we should go into some kind of economic downturn, it has not happened. Business has been strong all year; we ran about eight percent over last year."
K-Bar-K Power Distribution serves the residential construction market as well as the crating and palleting industrial market. The crating business has slowed recently, Kalous says, which corresponds with the slowdown in the industrial market, which F.W. Dodge attributes to the negative impact of reduced exports to Asia. However, residential construction in the Dallas-Fort Worth area is still going strong. ©
"Home construction is still very strong and we expect it to be strong through the first two-and-a-half quarters of 1999," Kalous says. "Many of our contractors that we work with have jobs booked into April of next year. New home sales have reached a high in the area as well. It's been good for so long everyone is looking over their shoulder waiting for the other shoe to drop, but I don't see it happening anytime too soon."
A recent report by the Lodging Research Network predicts that the rapid pace of U.S. lodging construction will drop from 147,700 new room starts in 1998 to 121,400 room starts in 1999, a 17.8 percent decline. Distributors supplying the lodging construction market have yet to see a downslide.
"I think hotel/motel is one of the hottest things outside of residential," says Don Kanz, president of Southern Staple Supply, Inc., in Dallas, Tex., one of the areas reported to be facing a slowdown. "We have a tremendous amount of residence inns and motels being built. They're just going up like crazy."
Nonbuilding construction in August dropped three percent, according to the F.W. Dodge report, but there was wide variation throughout this sector. Highway and bridge construction was up 43 percent, helped in part by a $63 million segment of Boston's reconstruction of its downtown central artery. Boston's "Big Dig" is one of the projects that has kept Pro Tool & Supply in Waltham, Mass., working at a steady pace.
"What we've experienced in the last two years is a pretty steady construction market," says Rob Culgin, owner of Pro Tool & Supply, "and for the next six months to a year it looks pretty comfortable. After that, I don't know. We've all been on a three to four year ride and I think that we're all realistic that it has to slow down sometime, whether it's public or private [construction]. But I don't see any immediate signs of that."
Talkback
Related Content
Related Content
Sponsored Links
View All Blogs
