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February Construction Falls 7 Percent

By Mark S. Kuhar

At a seasonally adjusted annual rate of $376.0 billion, new construction starts in February dropped 7 percent 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 2011, total construction starts on an unadjusted basis came in at $52.9 billion, down 14 percent from a year ago.

For the 12 months ending February 2012 versus the 12 months ending February 2011, which lessens the volatility present in year-to-date comparisons of just two months, total construction starts were down 2 percent.

“The pace of construction starts during the first two months of 2012 was subdued, retreating to the lower end of its recent range,” said 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
Nonbuilding construction in February dropped 16 percent to $107.8 billion (annual rate). Highway construction plunged 26 percent, resuming the declining trend that was present for much of 2011 before contracting improved briefly in December and January.

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

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

Nonresidential Building
Nonresidential building, at $127.6 billion (annual rate), dropped 7 percent in February. A large part of the shortfall came from a 22 percent 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 percent.

The healthcare facilities category in February decreased 9 percent. The other institutional categories reported gains in February, including a 22 percent increase for amusement-related work. Transportation terminal work in February advanced 45 percent. On the commercial side, warehouses and hotels retreated in February, falling 8 percent and 47 percent, respectively. Office construction improved 11 percent in February. Store construction in February was able to advance 35 percent from a weak January. The manufacturing plant category in February increased 9 percent.

Residential Building
Residential building in February grew 3 percent to $140.6 billion (annual rate). Most of the upward push came from multifamily housing, which rebounded 10 percent after sliding back in January. Single family housing, up 1 percent, essentially held steady in February, due to a mixed performance by region – the South Atlantic, up 8 percent; the Midwest, up 5 percent; the Northeast, down 1 percent; the West, down 2 percent; and the South Central, down 3 percent.