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January Construction Recedes 2 Percent

By Mark S. Kuhar

The value of new construction starts dropped 2 percent in January to a seasonally adjusted annual rate of $402.2 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies.

Both nonresidential building and housing settled back from December, while the nonbuilding construction sector managed to register a modest gain with the help of a rebound for new electric utility starts. On an unadjusted basis, total construction starts in January were reported at $27 billion, down 14 percent from the same month a year ago. For the 12 months ending January 2012 versus the 12 months ending January 2011, which lessens the volatility present in one-month comparisons, total construction starts were down 3 percent.

Highway and bridge construction dropped 9 percent, continuing to see the reduced activity that was present for much of 2011, in which the annual amount dropped 5 percent after stimulus-supported gains in the prior two years.

“For construction starts, the year 2012 got off slowly, with activity retreating further into the lower half of its recent range,” said Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “This is consistent with the view that construction is still struggling to achieve upward momentum, even with the recent improvement shown by the U.S. economy.”

Nonbuilding construction in January increased 3 percent to $127.9 billion (annual rate). Much of the upward lift came from electric utilities, which jumped 36 percent relative to a lackluster December. Water supply construction in January was down 5 percent, while river/harbor development fell a more substantial 26 percent. January gains were posted by sewer construction, up 5 percent; and miscellaneous public works, up 18 percent.

Nonresidential building in January slipped 1 percent to $139.9 billion (annual rate). On the institutional side, weaker activity was reported for most of the structure types. The educational building category, which fell 12 percent during 2011, dropped 3 percent in January relative to the previous month. In similar fashion, the public buildings category was down 23 percent. Amusement-related projects and churches in January were each down 6 percent, while transportation terminal work dropped 36 percent. The one institutional structure type that registered a January gain was healthcare facilities.

On the commercial side, the recent upward trend for hotels and warehouses paused in January, with hotels down 16 percent and warehouses down 11 percent. Store construction in January was able to move up 12 percent from its depressed December amount, and office construction advanced 20 percent.

Residential building, at $134.5 billion (annual rate), dropped 8 percent in January. Multifamily housing fell 26 percent, retreating from the elevated volume reported in December. January’s amount for multifamily housing was still 5 percent above the average monthly pace for 2011 as a whole, a year in which the annual total for multifamily housing climbed 23 percent. Single-family housing in January settled back 1 percent, as the result of this regional pattern – the Midwest, down 4 percent; the South Atlantic, down 3 percent; the Northeast, down 2 percent; the West, up 1 percent; and the South Central, up 2 percent.

The 14 percent decline for total construction on an unadjusted basis in January 2012 relative to January 2011 was due to this performance by major sector – nonresidential building, down 16 percent; residential building, up 17 percent; and nonbuilding construction, down 30 percent.

By region, total construction for January 2012 compared to January 2011 revealed decreased activity in the South Central, down 32 percent; the Northeast, down 28 percent; and the West, down 11 percent; while gains were reported for the South Atlantic, up 1 percent; and the Midwest, up 16 percent.