Construction Awards Declined 6% in May; Interest Rates Cited
NEW YORK -- New construction contracts awarded in May fell 6% from April, reflecting a sharp rise in interest rates, F.W. Dodge Co. said.</br></br>Nonresidential building, consisting of commmercial, industrial and institutional construction, dropped 8% while residential building declined 7%. Public works construction rose slightly.</br></br>F.W. Dodge, the forecasting unit of McGraw-Hill Inc., said U.S. construction contracts awarded in May dropped to a seasonally adjusted annual rate of $233.5 billion from a $247.6 billion rate in April. That brought the Dodge index to 149, down from 158 the previous month. The index compares current contracting with a 1982 base of 100.</br></br>"When interest rates go up, construction activity comes down -- it's one of the axioms of this business," said George A. Christie, vice president and chief economist for F.W. Dodge. "But if the surge of mortgage rates proves to be short-lived, as we expect, it means that a lot of this year's lost potential -- mainly one-family housing -- should be recovered in 1988 as rates retreat again."</br></br>Highway construction gave the industry its only boost in May as contracts for so-called nonbuilding construction, which includes public works and utilities, rose 3% to $46.4 billion. Mr. Christie said strength in that area in May continued to make up for transportation projects that were delayed earlier this year when federal funding was interrupted.