March Construction Starts Stay Even With Prior Month
- Published: Thursday, 05 May 2011 16:39
By Mark S. Kuhar
New construction starts in March came in at a seasonally adjusted annual rate of $404.9 billion, essentially the same pace as February, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. While total construction was unchanged from the prior month, this steady pattern came as the result of divergent behavior by construction’s three main sectors.
Nonresidential building in March increased sharply, following its subdued activity earlier this year, but declines were registered by housing and nonbuilding construction (public works and electric utilities). Through the first three months of 2011, total construction on an unadjusted basis was reported at $88 billion, down 10 percent from the same period a year ago. Highway and bridge construction dropped 9 percent, continuing to settle back after January’s heightened pace.
An Economic Look
“This period of low-level stability is looking to be more and more extended, pushing back the time when renewed expansion for overall construction activity is likely to take hold,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “Public works had initially offset some of the weakness shown by other types of construction, but it’s now beginning to lose momentum, given waning support from the federal stimulus act, tight state budgets, and cutbacks in federal funding included in the recently approved fiscal 2011 appropriations. While multifamily housing has strengthened in hesitant fashion, single family housing continues to be stalled. For nonresidential building, there’s still the downward pull coming from the institutional categories, but on the plus side commercial building seems to have already reached bottom, and the gains for commercial building in March would appear to be a positive development going forward. The note of caution for commercial building is that market fundamentals such as occupancies have only just begun to improve, and banks remain very cautious with regard to lending for new projects.”
For the first quarter of 2011, nonbuilding construction was down 2 percent compared to the fourth quarter of 2010. The March plunge for nonbuilding construction was due in large part to a substantial decline for electric utilities, which fell 43 percent from a robust volume in February to a still healthy amount in March (up 25 percent from the average monthly pace for 2010). Large electric power projects that were reported as construction starts in March included a $1.1 billion natural gas power plant in Florida and a $1 billion solar energy facility in California.
Public works construction in March registered a smaller decline, sliding 4 percent as the result of a mixed pattern by project type. Highway and bridge construction dropped 9 percent, continuing to settle back after January’s heightened pace. Both sewer and water supply construction registered declines in March, falling 13 percent and 12 percent, respectively. Stronger activity in March was reported for river/harbor development, up 51 percent with the aid of a $164 million shipyard pier replacement project in Virginia; and miscellaneous public works, which is up 6 percent for the month.
- Nonresidential building in March jumped 25 percent to $165.5 billion (annual rate).
- Residential building, at $118.1 billion (annual rate), slipped 3 percent in March.
- Nonbuilding construction in March dropped 19 percent to $121.3 billion (annual rate), retreating for the second straight month after the exceptional amount that was reported in January.
Another view of the current state of the construction market is provided by looking at 12-month moving totals, in this case the 12 months ending March 2011 compared to the twelve months ending March 2010. On this basis, total construction is down 5 percent, as the result of this pattern by sector – nonresidential building, down 9 percent; residential building, down 4 percent; and nonbuilding construction, down 1 percent.
By geography, the 12 months ending March 2011 showed this behavior for total construction – the South Atlantic, down 16 percent; the Northeast, down 9 percent; the South Central, down 4 percent; the Midwest, no change, and the West, up 3 percent.