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June Construction Starts Jump 15 Percent

By Mark S. Kuhar

New construction starts in June climbed 15 percent to a seasonally adjusted annual rate of $436.8 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. Highway and bridge construction climbed 9 percent. The gain followed particularly weak activity in May, and helped the pace of contracting during this year’s second quarter stay close to its first quarter level.

June featured a substantial increase for the nonbuilding construction sector, led by the start of several large electric utility projects. Nonresidential building also registered improvement in June, while housing edged up slightly. During the first six months of 2011, total construction starts on an unadjusted basis came in at $198.2 billion, down 7 percent from the same period a year ago.

“The pattern of construction starts during the early months of 2011 showed a loss of momentum, due largely to renewed weakness for single family housing combined with a pullback for public works and institutional building,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.

“June’s gain enables the average for this year’s second quarter to be down a modest 2 percent from the first quarter, a milder slowdown than what was being suggested by the data through May. The overall level of construction continues to be weak, but June’s gain is consistent with the sense that construction activity is hovering at a low level, rather than seeing further sustained declines.”

Nonbuilding construction in June soared 34 percent to $163.2 billion (annual rate). The lift came from the electric utility category, which advanced 103 percent in June as it continued to see a robust volume of projects reach the construction start stage. The public works sector in June registered a smaller 2 percent gain, reflecting a mixed pattern by project type. Highways and bridges climbed 9 percent in June, making a partial rebound after May’s depressed amount, although remaining below the elevated pace witnessed during 2010 and early 2011.

Sewer construction in June grew 4 percent. The miscellaneous public works category increased 14 percent. Decreased activity in June was reported for water supply systems, down 8 percent; and river/harbor development, down 34 percent.

Nonresidential building, at $153.6 billion (annual rate), climbed 11 percent in June. The commercial categories showed healthy percentage gains, moving up from May’s weak activity. Office construction in June rose 39 percent. Hotel construction jumped 55 percent, moving up from a particularly depressed May. Warehouse construction in June increased 30 percent, and the manufacturing plant category, which had been seeing an elevated pace of activity for much of 2011, settled back 13 percent in June.
On the institutional side of the nonresidential market, healthcare facilities in June rose 16 percent, continuing to strengthen after the sluggish activity earlier in 2011. The amusement-related category increased 90 percent in June. The public buildings category, which has fallen sharply over the past year, bounced back 89 percent in June.

Educational facilities, the largest institutional category, improved a moderate 4 percent in June. Institutional structure types with June declines were church construction, down 34 percent; and transportation terminals, down 77 percent. The steep drop for transportation terminal work followed heightened levels of activity during April and May.

Residential building in June grew 1 percent to $120.1 billion (annual rate). The upward push was provided by multifamily housing, which increased 8 percent after retreating in May. During the first half of 2011, the top five metropolitan areas in terms of the dollar amount of new multifamily projects were: New York, Washington D.C., Chicago, Boston and Seattle.

Single family housing in June was unchanged from May, as the result of a varied pattern by region – the Midwest, up 3 percent; the South Central, up 2 percent; the Northeast, up 1 percent; the South Atlantic, down 1 percent; and the West, down 5 percent. Murray noted, “While single family housing in June held steady with May, it was still down 3 percent from its average for all of 2010, and is headed for a year-over-year decline in 2011 after its modest 2010 increase.