CIRB: State construction shows signs of a slowdown while activity continues upward

California's total statewide construction volume for April totals $5.87 billion, up 20.6 percent from the same period last year, thanks to a horde of major public works projects including water pipelines.

BURBANK, Calif., June 4, 2001—While the state's private nonresidential construction activity is showing definite signs of a slowdown, California's total statewide construction volume for April totals $5.87 billion, up 20.6 percent from the same period last year, thanks to a horde of major public works projects including power plants, water pipelines and a San Diego County dam.

According to Ben Bartolotto, director of the Construction Industry Research Board (CIRB) which gathers monthly statistical data on the state's construction activity, "these large multi-million dollar projects tend to inflate and distort what is actually happening on a month to month basis as well as in year-to-date totals."

Point of fact: Heavy construction activity in April totaled $1.279 billion compared to March's total of $577.9 million. Two natural gas powered plants, one near Bakersfield and another in San Bernardino County in the high desert near Victorville, by themselves totaled $650.0 million. Add in the $139.9 million Olivenhain Dam in San Diego County and a $48.1 million water pipeline in Contra Costa County and the total is $840.5 million for four major projects.

"Some of these larger projects may take 18 to 24 months to complete," said Bartolotto, "but their entire cost is counted in the month the work commences which distorts the year-to-date totals."

For example, in the first four months of 2001, public works construction, including highway-heavy and public buildings (government owned) totals $6.289 billion statewide, up $1.858 billion, or 41.9 percent higher than in the same period last year. Bartolotto points out that four major power plants started this year totaling $1.325 billion. In all of 2000, there were only two power plants totaling $852.5 million.

"When you take away these major projects and compare public works projects less than $10 million in size the year-to-date totals are more moderate," says Bartolotto. CIRB data shows public works projects under $10 million in the first four months total $2.453 billion and account for 39.0 percent of the state's total public works activity. "By limiting activity to less than $10 million in size, the total public works increase in the first four months falls to only 3.0 percent compared to the 41.9 percent increase when all projects are counted," notes Bartolotto. "This includes a 43.4 percent increase for public buildings while heavy construction posts a decline of 19.4 percent from the same period last year."

The year-to-date decline in the heavy construction, comparing only projects less than $10 million, of 19.4 percent differs from the 29.6 percent increase when the larger projects are included.

By contrast, one of the strongest construction sectors over the past five years — private nonresidential building — declined for the second straight month. Permits issued in April for private nonresidential building total $1.287 billion, down 13.2 percent from March and down 0.5 percent from April 2000. CIRB notes the annual rates of the past two months (March and April) have averaged 17.1 percent below the average of the previous twelve months. Forecasts show private nonresidential building at $17.91 billion in 2001, down 3.8 percent from 2000.

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