February construction starts fall 7 percent


At a seasonally adjusted annual rate of $376.0 billion, new construction starts in February dropped 7% from the previous month, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies.  The nonbuilding construction sector, comprised of public works and electric utilities, lost considerable momentum in February, and diminished activity was also reported for nonresidential building.

Meanwhile, residential building in February was able to register modest growth.  For the first two months of 2012, total construction starts on an unadjusted basis came in at $52.9 billion, down 14% from a year ago.  For the twelve months ending February 2012 versus the twelve months ending February 2011, which lessens the volatility present in year-to-date comparisons of just two months, total construction starts were down 2%.

The February statistics lowered the Dodge Index to 80 (2000=100), compared to 85 in January.  For 2011 as a whole, the Dodge Index averaged 91.  “The pace of construction starts during the first two months of 2012 was subdued, retreating to the lower end of its recent range,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.

“Renewed expansion for the construction industry is still struggling to take hold, with gains for a few project types such as multifamily housing being outweighed by declines for project types that are largely publicly financed.  This was especially the case in February, when much of the downward pull came from weakness for public works and institutional building,” Murray said.

Nonbuilding construction in February dropped 16% to $107.8 billion (annual rate). Highway construction plunged 26%, resuming the declining trend that was present for much of 2011 before contracting improved briefly in December and January.  Murray noted, “The factors affecting new construction starts for highways are generally negative – fiscal 2012 appropriations included a 5% cut to the federal-aid highway program, the lift from the federal stimulus act has run its course, states continue to deal with budget constraints, and the funding authority under the existing federal transportation legislation is set to expire on March 31.  While Congress has taken steps to extend the funding authority by considering new transportation measures, such as the $109 billion two-year bill recently passed by the Senate, the uncertainty over the shape and timing of a new transportation package has added another negative to this year’s prospects for highway construction.”

Other large declines for public works in February were registered by water supply systems, down 18%; miscellaneous public works (including site work), down 21%; and sewers, down 22%.

The two public works categories able to register gains in February were the following – bridges, up 19% and river/harbor development, up 28%.  The electric utilities category in February fell 21%.

Nonresidential building, at $127.6 billion (annual rate), dropped 7% in February.  A large part of the shortfall came from a 22% slide for educational buildings, continuing the descent for this category which has been underway for the past three years.    Public buildings (courthouses, detention facilities, and military buildings) weakened further in February, plummeting 46%.  The healthcare facilities category in February decreased 9%.  The other institutional categories reported gains in February, including a 22% increase for amusement-related work.  Transportation terminal work in February advanced 45%.

On the commercial side, warehouses and hotels retreated in February, falling 8% and 47% respectively.  Office construction improved 11% in February.  Store construction in February was able to advance 35% from a weak January.  The manufacturing plant category in February increased 9%.

The 14% decline reported for total construction on an unadjusted basis during the first two months of 2012, compared to 2011, was the result of a mixed performance by major sector.  Nonresidential building dropped 17% year-to-date, reflecting this pattern – commercial building, down 9%; institutional building, down 15%; and manufacturing building, down 54%.  Residential building climbed 20% year-to-date, with multifamily housing up 23% while single family housing grew 20% from its very weak amount at the start of last year.  Nonbuilding construction fell 33% year-to-date, due to a 20% retreat for public works and a 56% reduction for electric utilities.  The size of the year-to-date decline for nonbuilding construction was affected by the comparison to elevated activity during the first two months of 2011.By region, total construction starts in the first two months of 2012 showed an increase for one region, with the South Atlantic climbing 7%, while declines were registered by the other four regions – the Midwest, down 2%; the West, down 11%; the Northeast, down 21%; and the South Central, down 32%.

The 2% drop for total construction on a twelve-month moving total basis, meaning the twelve months ending February 2012 versus the twelve months ending February 2011, was the result of this behavior by major sector – nonresidential building, down 3%; residential building, up 8%; and nonbuilding construction, down 10%.  By geography, the twelve months ending February 2012 showed the following performance for total construction – the South Atlantic, up 13%; the West, up 3%; the Northeast and Midwest, each down 8%; and the South Central, down 12%. Read More.


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