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February Construction Falls 7% Nationwide

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At a seasonally adjusted annual rate of $376 billion, new construction starts in February dropped 7% from the previous month, according to McGraw-Hill Construction, a division of The McGraw-Hill Cos. The nonbuilding construction sector, comprised of public works and electric utilities, lost considerable momentum in February, and diminished activity was also reported for nonresidential building.

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Meanwhile, residential building in February was able to register modest growth. For the first two months of 2011, total construction starts on an unadjusted basis came in at $52.9 billion, down 14% from a year ago. For the 12 months ending February 2012 versus the 12 months ending February 2011—which lessens the volatility present in year-to-date comparisons of just two months—total construction starts were down 2%.

The February statistics lowered the Dodge Index to 80 (2000=100), compared to 85 in January. For 2011 as a whole, the Dodge Index averaged 91. “The pace of construction starts during the first two months of 2012 was subdued, retreating to the lower end of its recent range,” said Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “Renewed expansion for the construction industry is still struggling to take hold, with gains for a few project types such as multifamily housing being outweighed by declines for project types that are largely publicly financed. This was especially the case in February, when much of the downward pull came from weakness for public works and institutional building.”

Nonbuilding Construction

Nonbuilding construction in February dropped 16% to $107.8 billion (annual rate). Highway construction plunged 26%, resuming the declining trend that was present for much of 2011 before contracting improved briefly in December and January. Murray noted, “The factors affecting new construction starts for highways are generally negative—fiscal 2012 appropriations included a 5% cut to the federal-aid highway program, the lift from the federal stimulus act has run its course, states continue to deal with budget constraints, and the funding authority under the existing federal transportation legislation is set to expire on March 31.

While Congress has taken steps to extend the funding authority by considering new transportation measures, such as the $109-billion, two-year bill recently passed by the Senate, the uncertainty over the shape and timing of a new transportation package has added another negative to this year’s prospects for highway construction.”

Other large declines for public works in February were registered by water supply systems, down 18%; miscellaneous public works (including site work), down 21%; and sewers, down 22%. The decline for miscellaneous public works was cushioned by $344 million for site work at an oil storage facility in Houston.

The two public works categories able to register gains in February were the following – bridges, up 19% with the help of a $162-million railroad bridge in California; and river/harbor development, up 28%. The electric utilities category in February fell 21%, although the latest month did include several noteworthy projects—an $880-million wind-power facility in Texas, a $232-million wind-power facility in Michigan, a $186-million, wood-fired power plant in New Hampshire, and a $140-million upgrade to a nuclear power plant in California.


Nonresidential Building

Nonresidential building, at $127.6 billion (annual rate), dropped 7% in February. A large part of the shortfall came from a 22% slide for educational buildings, continuing the descent for this category, which has been underway for the past three years. While February did include groundbreaking for two large high school projects – a $120-million new high school in Cincinnati and an $87-million high school addition in Pittsburgh—they were not enough to avert a decline for the overall category. Public buildings (courthouses, detention facilities and military buildings) weakened further in February, plummeting 46%.

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