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August Construction Starts Increase 8% Nationwide

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At a seasonally adjusted annual rate of $424.7 billion, new construction starts in August advanced 8%, according to McGraw-Hill Construction, a division of The McGraw-Hill Cos. The gain followed a 10% decline in July, and continued the fluctuating pattern that’s been present in recent months. 

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The pickup for total construction in August was the result of greater activity for each of construction’s three main sectors. For the first eight months of 2011, total construction on an unadjusted basis was reported at $274.8 billion, down 6% from the same period a year ago.

The August statistics lifted the Dodge Index to 90 (2000=100), up from July’s 83. “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. At the same time, total construction remains on track to register a moderate decline for 2011 as a whole, after leveling off in 2010. While August showed some improvement for institutional building and public works, each of these sectors will be subject to funding cutbacks at the federal and state levels of government.

"Single-family housing continues to see homebuyer demand restrained by the sluggish economic environment and more restrictive lending standards.  And, what appears to be the early signs of recovery for commercial building may well end up being deferred by rising investor concern about employment growth and the near-term prospects for the U.S. economy,” Murray said.

 

Nonresidential Building
Nonresidential building in August grew 7% to $153.6 billion (annual rate).  The institutional side of the nonresidential market showed a strong gain for health-care facilities, which jumped 107%. Lifting the health-care total in August was the start of a $385-million U.S. Army medical center at Fort Hood, Texas. Additional support came from the start of two large hospital projects in California, valued at $270 million and $164 million respectively, and a $220-million hospital project in Maine. 

The public building category climbed 55% in August from its low July amount, reflecting the start of a $115-million courthouse building in Philadelphia. The amusement-related category in August increased 18%, helped by the start of a $45-million sports arena in Bangor, Maine, and a $45-million convention center in Cedar Rapids, Iowa. Heading downward in August was the educational building category, which fell 7% 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%; and transportation terminals, down 8%.
The commercial side of the nonresidential market showed a mixed pattern by project type. Hotel construction surged 125% from a weak July, helped by the start of a $154-million convention center hotel in Nashville.  Warehouse construction grew 30%, with the push coming from the start of a $150-million distribution center in Martinsburg, W.V., while store construction advanced 18%. 

Moving in the opposite direction was office construction, which fell 18% in August. A steeper decline was reported for the manufacturing building category, which retreated 62% from July, helped by the start of a $1.5-billion semiconductor plant in Arizona.

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