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August Construction Climbs 8 percent

By Mark S. Kuhar

At a seasonally adjusted annual rate of $424.7 billion, new construction starts in August advanced 8 percent, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. The gain followed a 10 percent decline in July, and continued the fluctuating pattern that’s been present in recent months. The pickup for total construction in August was the result of greater activity for each of construction’s three main sectors – nonresidential building, residential building, and nonbuilding construction. Highways and bridges, however, plunged 21 percent in August.

“During the first five months of this year, total construction had trended downward, but over the next three months an up-and-down pattern has emerged,” said Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “This suggests that construction starts are beginning to stabilize after the earlier loss of momentum.”

Nonbuilding construction in August climbed 13 percent to $143.0 billion, making a partial rebound after plunging 23 percent in July. The dams and river/harbor development category surged 283 percent, reflecting the boost coming from $1.5 billion for work on the Olmsted Dam in Kentucky, as well as $260 million for the Calaveras Dam replacement project in California. Sewer and waste disposal construction was also strong in August, advancing 64 percent, with support coming from the start of a $463 million chemical weapons storage and disposal facility in Colorado. Regarding the drop for highways and bridges, Murray noted, “Of the various project types, highway and bridge construction received the most support from federal stimulus funds over the past two years, but that support has diminished substantially during 2011.”

Nonresidential building in August grew 7 percent to $153.6 billion (annual rate). The institutional side of the nonresidential market showed a strong gain for healthcare facilities, which jumped 107 percent. The public building category climbed 55 percent in August from its low July amount. The amusement-related category in August increased 18 percent.

Heading downward in August was the educational building category, which fell 7 percent despite groundbreaking for a $95 million high school in Maryland and an $86 million biomedical research facility in Minnesota. Also retreating in August were churches, down 11 percent; and transportation terminals, down 8 percent.

The commercial side of the nonresidential market showed a mixed pattern by project type. Hotel construction surged 125 percent from a weak July. Warehouse construction grew 30 percent, while store construction advanced 18 percent. Moving in the opposite direction was office construction, which fell 18 percent in August. A steeper decline was reported for the manufacturing building category, which retreated 62 percent from July.

Residential building, at $128 billion (annual rate), increased 4 percent in August. Most of the upward movement came from multifamily housing, which rose 15 percent in August, continuing the trend that has been present for much of 2011. Large multifamily projects in New York, Boston and Los Angeles reached groundbreaking in August. Through the first eight months of 2011, the top five metropolitan areas in terms of the dollar amount of multifamily projects were – New York, Washington D.C., Boston, Chicago and Los Angeles.

Sin­gle family housing in August managed to edge up 1 percent, as the pattern of recent months suggests that activity is stabilizing at a low volume after the declines witnessed earlier in 2011. The pace for single family housing in August, in dollar terms, was still 2 percent below the average monthly pace that was shown during 2010.