August construction climbs 8 percent


At a seasonally adjusted annual rate of $424.7 billion, new construction starts in August advanced 8%, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. The gain followed a 10% decline in July, and continued the fluctuating pattern that’s been present in recent months. The pickup for total construction in August was the result of greater activity for each of construction’s three main sectors – nonresidential building, residential building, and nonbuilding construction. For the first eight months of 2011, total construction on an unadjusted basis was reported at $274.8 billion, down 6% from the same period a year ago.

The August statistics lifted the Dodge Index to 90 (2000=100), up from July’s 83.

“During the first five months of this year, total construction had trended downward, but over the next three months an up-and-down pattern has emerged,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “This suggests that construction starts are beginning to stabilize after the earlier loss of momentum. At the same time, total construction remains on track to register a moderate decline for 2011 as a whole, after leveling off in 2010. While August showed some improvement for institutional building and public works, each of these sectors will be subject to funding cutbacks at the federal and state levels of government. Single family housing continues to see homebuyer demand restrained by the sluggish economic environment and more restrictive lending standards. And, what appears to be the early signs of recovery for commercial building may well end up being deferred by rising investor concern about employment growth and the near term prospects for the U.S. economy.”

Nonresidential building in August grew 7% to $153.6 billion (annual rate). The institutional side of the nonresidential market showed a strong gain for healthcare facilities, which jumped 107%. .

The commercial side of the nonresidential market showed a mixed pattern by project type. Hotel construction surged 125% from a weak July, helped by the start of a $154 million convention center hotel in Nashville TN. Warehouse construction grew 30%, with the push coming from the start of a $150 million distribution center in Martinsburg WV, while store construction advanced 18%. Moving in the opposite direction was office construction, which fell 18% in August. A steeper decline was reported for the manufacturing building category, which retreated 62% from July which included the start of a $1.5 billion semiconductor plant in Arizona.

Residential building, at $128.0 billion (annual rate), increased 4% in August. Most of the upward movement came from multifamily housing, which rose 15% in August, continuing the trend that has been present for much of 2011. Single family housing in August managed to edge up 1%, as the pattern of recent months suggests that activity is stabilizing at a low volume after the declines witnessed earlier in 2011. The pace for single family housing in August, in dollar terms, was still 2% below the average monthly pace that was shown during 2010.

Nonbuilding construction in August climbed 13% to $143.0 billion, making a partial rebound after plunging 23% in July. The dams and river/harbor development category surged 283%. Sewer and waste disposal construction was also strong in August, advancing 64%. Other types of public works retreated in August, including a 21% drop for highways and bridges.

Murray noted, “Of the various project types, highway and bridge construction received the most support from federal stimulus funds over the past two years, but that support has diminished substantially during 2011.” August declines were also reported for “miscellaneous” public works (e.g., site work, rail lines, pipelines), down 8%; and water supply systems, down 14%. For the electric utility category, contracting continued to be strong with a 16% gain in August.

The 6% shortfall for total construction on an unadjusted basis during the January-August period of 2011 reflected a mixed performance by sector. Nonresidential building fell 8% year-to-date, as a 17% drop for institutional building outweighed a 4% gain for commercial building and a 72% gain for manufacturing building. Residential building decreased 5% year-to-date, with single family housing down 7% while multifamily housing advanced 8%. Nonbuilding construction year-to-date slipped 4%, as public works retreated 23% while electric utilities soared 129%.

By region, total construction starts showed the following year-to-date performance – the Midwest and Northeast, each down 13%; the South Atlantic, down 6%; the South Central, down 4%; and the West, up 4%. Read More.