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New Construction Starts in December Jump 23 Percent

By Mark S. Kuhar

New construction starts in December climbed 23 percent to a seasonally adjusted annual rate of $530 billion, according to McGraw-Hill Construction, a division of The McGraw- Hill Companies. The sharp increase for total construction followed two months of lackluster activity, as several very large projects in December helped to lift the pace of contracting.

By major sector, substantial gains in December were reported for nonresidential building and nonbuilding construction, while housing maintained the steady upward trend that’s been present for much of the past year.

Highway construction in December increased 8 percent, helped by a $360 million segment of the I-95/395 HOV-HOT Lanes project in Virginia and a $101 million shoulder restoration project for the Garden State Parkway in New Jersey. On the negative side, bridge construction in December was down 6 percent, and miscellaneous public works (which includes site work, pipelines, rail lines, etc.) slipped 1 percent.

For all of 2012, total construction starts grew 6 percent to $463.6 billion, a moderate yet stronger rate of increase than what took place during 2010 (up 2 percent) and 2011 (up 1 percent).

“The year ended on a strong note, with December coming in at the upper end of the range of activity reported during 2012,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “The subdued activity witnessed during October and November suggested that the hesitant recovery for construction starts might be losing momentum, but December’s strength alleviates some of that concern. The 6 percent gain for total construction starts in 2012 indicates that the tenuous expansion for construction is beginning to gain traction, particularly after the basically flat activity experienced during the previous two years. In 2012, single-family housing registered steady improvement, finally joining the recovery process already underway for multifamily housing. Commercial building, while still at a very weak level, edged upward, and electric utility starts achieved a new high in current dollar terms.

Nonresidential Building
Nonresidential building in December surged 33 percent to $189.0 billion (annual rate), with growth registered by most of its structure types. The commercial sector featured a strong 53 percent gain for office construction.

Warehouse construction in December rebounded 84 percent from a very weak November. In contrast to the increases shown by these commercial structure types, hotel construction in December was flat. Manufacturing plant construction, which can be volatile on a month-to-month basis, surged 177 percent in December after a very weak November.

On the institutional side, healthcare facilities in December grew 12 percent, and educational buildings, the largest institutional category, grew 4 percent.

The public buildings category increased 56 percent, while a 22 percent gain was seen in the amusement category. After very depressed activity in November, transportation terminals and churches posted large December gains, rising 77 percent and 45 percent, respectively.

Residential building
Residential building in December increased 6 percent to $198.5 billion (annual rate). Single-family housing advanced another 3 percent in December, and over the course of 2012 demonstrated remarkably steady growth, with gains reported in eleven out of the 12 months.

Nonbuilding construction
Nonbuilding construction in December soared 42 percent to $142.5 billion (annual rate), rebounding sharply after its depressed November amount. Much of the December boost came from a 635 percent jump for the electric utility category, bouncing back to the elevated contracting witnessed earlier in the year before the sharp retreat in October and November.

The public works sector in December improved 7 percent, making a partial rebound after sliding 22 percent in the previous month. The environmental categories strengthened after their depressed performance in November, with sewers up 32 percent; river/harbor development, up 17 percent; and water supply systems, up 6 percent.