Construction activity hits record for March

Riding a record-setting month in February, construction activity again toppled economists’ expectations in March with gains of 0.5 percent.

The U.S. Commerce Department attributes most of the increase to strong office and shopping mall building activity that helped offset a slowdown in housing construction. This rise pushed total construction activity to a seasonally adjusted annual rate of $1.05 trillion, an all-time high.

The March advance – which many economists predicted would be a 0.3 percent gain – followed a similar 0.5 percent gain in February and a 0.4 percent rise in January. This is the 14th monthly record in a row, according to the U.S. Census Bureau.

Ken Simonson, chief economist for the Associated General Contractors of America, said construction activity would likely remain strong this year as long as interest rates continue rising at a gradual pace.

“I expect these results to continue for several more months, with both private and public nonresidential construction likely to strengthen further, offsetting a likely slackening of residential construction later in the year,” Simonson said.

For the first quarter of 2005 as a whole, construction exceeded the first-quarter 2004 total by 9 percent. Furthermore, the gains were widespread. Private residential construction was up 13 percent over the year-ago quarter, private nonresidential was up 7 percent and public construction was 3 percent higher.

“There were some big winners in the first quarter,” Simonson said.

Manufacturing construction rose 31 percent and communication was up 26 percent, after years of falling activity. Lodging jumped 16 percent due to higher occupancy and room rates at hotels and higher attendance at business meetings and conventions.

The broad commercial category climbed 9 percent, led by a 19-percent rise in multi-retail construction such as “big-box” stores and shopping centers. Warehouse construction, which had lagged for years, rose 11 percent, reflecting a recent rise in inventories.

Also notable was multi-family construction, edging out single-family homes 16 percent to 14 percent.

Simonson said maintaining record growth depends on Congress’s actions concerning the long-debated highway bill. But other factors demand attention as well.

“My biggest concern is prices for construction materials, which are running 8 percent ahead of last year’s level,” he said.

In fact, a report from the Institute for Supply Management reveals prices continued to increase in April. Simonson said steel prices could flatten, but other materials – cement, gypsum wallboard and petroleum-based products – are likely to cost a lot more than they did last year.

Patrick Beeson can be contacted at