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July Construction Declines 10% Nationwide

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New construction starts fell 10% in July to a seasonally adjusted annual rate of $401.2 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Cos. After showing improvement during the spring, the pace of construction starts retreated over the past three months, with July coming in at the lower end of the recent range of activity.

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Non-building construction, comprised of public works and electric utilities, fell sharply in July, while both nonresidential building and housing lost some of their earlier momentum. For the first seven months of 2012, the volume of total construction starts on an unadjusted basis was reported at $262.9 billion, holding on to a 4% gain compared to the same period a year ago.

The July statistics lowered the Dodge Index to 85 (2000=100), compared to a 94 for June. The current year began on a weak note, with the Dodge Index slipping to 84 in February, to be followed by elevated index readings in March (103) and April (114), which reflected in part the boost coming from the start of two massive nuclear power projects located in Georgia and South Carolina. Activity then settled back in May and June, with index readings of 95 and 94 respectively, which remained slightly above the 92 average for the Dodge Index for all of 2011. July brings the pace of total construction starts back to the lackluster activity reported at the outset of 2012.

“The construction industry is still struggling to gain upward traction, as construction starts continue to exhibit an up-and-down pattern,” stated Robert A. Murray, vice president of economic affairs for McGraw- Hill Construction. “The public works and institutional building sectors are still being adversely affected by the tough fiscal climate facing the federal, state and local levels of government. Commercial building, which seemed to be in the very early stages of recovery, is seeing its faint upturn become more tenuous with the sluggish employment picture. The upward potential for housing in the near term is also being dampened by the persistently hesitant U.S. economy. Overall, the construction industry remains stuck for now in an extended process of turning the corner.”

Non-building Construction

Non-building construction in July dropped 18% to $109.1 billion (annual rate). The electric utility category plunged 36%, falling for the third month in a row after the exceptional activity that was reported during March and April. July did include the start of a few noteworthy projects, such as a $535-million gas-fired power plant and a $75-million biomass plant, both in Texas, but the July pace of new electric utility starts was down 84% from this category’s average for the first six months of 2012.

The public works sector in July fell 16%, sliding back after a brief upturn in June. The “other public works category,” comprised of such diverse project types as sitework, mass transit, pipelines and outdoor sports stadiums, plummeted 61% from June, which had been lifted by an estimated $1 billion for work on a new football stadium for the San Francisco 49ers in Santa Clara, Calif.

The largest “other public works” project reported as a July start was a $75-million stadium expansion for Kansas State University in Manhattan, Kan.

Bridge construction in July was down 19%, even with the start of a $261-million bridge replacement project in Oregon, and sewer construction dropped 11%. On the plus side, highway construction in July improved 6% from a lackluster June, although July’s amount was still 8% below this category’s average pace during 2011.

Water supply construction in July grew 20%, aided by a $100-million expansion to a water reclamation facility in Arizona, while water resource construction jumped 57%, reflecting the start of a $97-million dam rehabilitation project in Tennessee.

Nonresidential Building

Nonresidential building, at $138.1 billion (annual rate), decreased 7% in July, with weaker activity reported for the majority of the institutional categories. Educational facilities in July dropped 12% after showing some improvement during the previous two months.

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