At a seasonally adjusted annual rate of $404.9 billion, new construction starts in February fell 4 percent from the previous month, it was reported by McGraw-Hill Construction, a division of The McGraw-Hill Companies. Nonresidential building lost momentum for the second month in a row, and the public works sector retreated after its elevated pace in January. Highway and bridge construction dropped 27 percent. Meanwhile, residential building in February was able to register modest growth. For the first two months of 2011, total construction on an unadjusted basis was $55.9 billion, down 9 percent from a year ago.
“The pace of construction starts continues to fluctuate within a set range, as the gains for one month are taken back by weaker activity in subsequent months,” said Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “Compared to the declines witnessed from 2007 through 2009, the overall volume of activity has steadied in a broad sense, but this period of low-level stability is turning out to be extended. Given various countervailing factors in the environment, this fluctuation within a set range is likely to continue a while longer. On the plus side, job growth seems to be picking up, vacancy rates are beginning to recede, and interest rates remain low. At the same time, financing for construction projects from the banking sector has shown only modest improvement. And, the tough fiscal climate being faced by federal, state, and local governments has added further constraints to public construction programs.”
The 9 percent decline registered by total construction on an unadjusted basis for the first two months of 2011, compared to 2010, was the result of a mixed performance by major sector. Nonresidential building was down 21 percent, reflecting this pattern by segment – commercial building, up 6 percent; manufacturing building, up 483 percent; and institutional building, down 37 percent.
Last year’s nonresidential total included the start of two massive projects during the January-February period – the $3 billion transit hub in lower Manhattan, N.Y., and the $1.1 billion airport terminal project at Los Angeles International Airport. If these two large institutional projects are excluded from the 2010 statistics, then the year-to-date change for 2011 would be the following – institutional building, down 18 percent; nonresidential building, down 5 percent; and total construction, down 2 percent. Nonbuilding construction during the January-February period of 2011 was up 9 percent, helped by this year’s early strength for electric utilities, while residential building retreated 14 percent year-to-date. By geography, total construction during the first two months of 2011 performed as follows – the Northeast, down 34 percent; the South Atlantic, down 30 percent; the Midwest, down 6 percent; the West, up 5 percent; and the South Central, up 17 percent.
- Nonbuilding construction, at $151.5 billion (annual rate), slipped 9 percent in February. Highway and bridge construction dropped 27 percent from January’s exceptional amount, which included the start of a $1.5 billion project to add new lanes to the LBJ Freeway in Dallas. The February pace for highway and bridge construction remained a slight 1 percent above the monthly average for 2010, as the waning support from the federal stimulus act is only just beginning to have a dampening impact.
- Nonresidential building in February dropped 5 percent to $132.3 billion (annual rate), retreating for the second straight month after December’s heightened activity.
- Residential building in February moved up 2 percent to $121.1 billion (annual rate). The strength came from the multifamily side of the housing market, which advanced 67 percent in February after a brief loss of momentum during January.
Useful perspective is obtained by looking at 12-month moving totals, in this case the 12 months ending February 2011 compared to the 12 months ending February 2010. On this basis, total construction is down 3 percent, due to this pattern by sector – nonresidential building, down 10 percent; nonbuilding construction, no change; and residential building, up 1 percent. By region, the 12 months ending February 2011 showed this behavior for total construction – the South Atlantic, down 16 percent; the Northeast, down 6 percent; the Midwest, down 1 percent; the South Central, up 1 percent; and the West, up 4 percent.