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May Construction Slides 16 Percent

By Mark S. Kuhar

At a seasonally adjusted annual rate of $444.9 billion, new construction starts in May retreated 16 percent from the previous month, it was reported by McGraw-Hill Construction, a division of The McGraw-Hill Companies. The decline followed substantial gains for total construction in March (up 23 percent) and April (up 11 percent), which reflected the lift coming from two massive nuclear power projects.

Without a similar lift in May, combined with a pullback for public works, the nonbuilding construction sector fell sharply. At the same time, nonresidential building in May showed improvement for the second month in a row, strengthening after weak activity in the early months of 2012, while residential building in May continued its moderate upward path.

“The picture of a construction market that’s struggling to achieve upward momentum, with gains for some project types but losses for other project types, continues to hold true,” said Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.

Nonbuilding Construction
Nonbuilding construction in May dropped 47 percent to $132.1 billion (annual rate). A large share of the nonbuilding downturn was the result of a 71 percent plunge for the electric utility category, following its exceptionally strong volume in April.

The public works sector in May resumed its downward trend, retreating 16 percent after its brief upturn in April. Highway and bridge construction in May slipped 3 percent, with activity coming in 12 percent below the average monthly pace for these categories during 2011. The “miscellaneous” public works category, which includes mass transit, plunged 40 percent in May. The environmental public works categories showed decreased contracting in May, with sewers down 3 percent, river/harbor development down 23 percent, and water supply systems down 24 percent.

Nonbuilding construction
Nonbuilding construction climbed 20 percent year-to-date, the result of a 74 percent surge for electric utilities combined with a 5 percent reduction for public works. Nonresidential building was the one major sector to report a year-to-date decline, falling 18 percent, with decreased activity for these segments – commercial building, down 5 percent; institutional building, down 21 percent; and manufacturing plants, down 38 percent.

Nonresidential Building
Nonresidential building, at $153.9 billion (annual rate), climbed 12 percent in May. The institutional side of the nonresidential market showed moderate improvement for the second month in a row, after a weak start to 2012, although its rate in May was still 13 percent below its average monthly pace during 2011. The educational building category jumped 22 percent in May.

The public buildings category (which includes courthouses and detention facilities) increased 16 percent in May. On the negative side, the healthcare facilities category in May decreased 29 percent after an elevated April.

Reduced contracting in May was also reported for amusement-related work, down 20 percent; and churches, down 12 percent. The commercial categories in May were mixed. Office construction climbed 32 percent, with May coming in 17 percent above the category’s average monthly pace during 2011.

Hotel construction in May jumped 48 percent, store construction retreated 29 percent after its improved April volume, while warehouse construction slipped 16 percent. The manufacturing plant category in May contributed to the gain for nonresidential building, surging 108 percent.

Residential Building
Residential building in May increased 8 percent to $158.9 billion (annual rate). Multifamily housing showed renewed strength after pausing in April, rising 33 percent. Single family housing in May grew 2 percent, and since February 2011 the dollar amount for single-family housing has shown slight gains in 12 out of 15 months. The May volume for single-family housing was 24 percent above its average monthly pace during 2011.