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August Construction Starts Advance 8% Nationwide

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At a seasonally adjusted annual rate of $433.9 billion, new construction starts in August climbed 8% relative to July, it was reported by McGraw-Hill Construction, a division of The McGraw-Hill Cos.

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After declines in the previous three months, the August pickup was the result of greater activity for each of construction’s three main groups – non-residential building, residential building and non-building construction. During the first eight months of 2012, total construction starts on an unadjusted basis came in at $304.5 billion, up 3% from the same period a year ago.

The August statistics raised the Dodge Index to 92 (2000=100), up from July’s 85. After reaching 114 in April, which was lifted by the start of a massive nuclear power plant in South Carolina, the Dodge Index then retreated through July. With its August rebound, the Dodge Index has returned to the average level that was reported for all of 2011.

“The pattern of construction starts continues to exhibit an up-and-down pattern, with the end result being that overall construction activity has yet to show much in the way of sustained growth,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “Gains for some project types continue to be offset by declines for other project types. So far in 2012, housing has been one of the brighter areas for construction – multifamily housing is strengthening, and single-family housing is finally registering steady growth, although in a very gradual manner.

"The commercial project types have shown hesitant upward movement while this year’s earlier weakness for the institutional sector seems to be easing a bit. Electric utility construction is seeing another year of exceptionally strong activity, but the public-works sector continues to deal with spending limitations. If overall construction activity is to establish a more solid upward trend, the degree of uncertainty surrounding the U.S. economy needs to recede, which may prove difficult to achieve in the near term given the impending ‘fiscal cliff’ at the end of 2012,” Murray said.

Nonresidential Building

Nonresidential building in August grew 7% to $147.7 billion (annual rate). Much of the boost in August came from the institutional categories, in contrast to this sector’s generally weak performance during most of 2012. Educational facilities in August increased 17%, helped by a greater amount of new high school construction projects, with the three largest located in Indiana ($100 million), New York ($88 million), and Massachusetts ($70 million).

Several university-related projects also contributed to the August gain for educational facilities, led by the start of a $90-million science building at Middle Tennessee State University in Murfreesboro and a $75-million building at George Washington University’s School of Public Health in Washington, D.C.

The transportation terminal category in August jumped 111%, reflecting $325 million for work on a subway station in New York City and a $200-million expansion to the JetBlue terminal at New York’s JFK International Airport.
The amusement category in August climbed 23%, helped by a $78 million auditorium expansion in Charleston, S.C., while church construction grew 11% from a depressed July. Institutional categories that retreated in August were health care facilities and public buildings, as each dropped 11%.

Several commercial categories in August lost momentum, slipping back after the improvement shown earlier this year. Store construction in August fell 10% from July, while warehouse construction decreased a more substantial 29%.

At the same time, both stores and warehouses were able to hold onto year-to-date gains compared to last year, rising 10% and 3%, respectively. Office construction in August retreated 5%, even with groundbreaking for such projects as a $44-million headquarters building in Kansas City, Mo., and a $39-million office building in Houston.

Showing slight growth in August was hotel construction, which edged up 2% with the help of a $50-million hotel in Milwaukee. Manufacturing plant construction in August also posted a slight gain, increasing 1%. Large manufacturing projects that reached groundbreaking in August included a $300-million semiconductor research and development facility in Arizona and a $150-million tire plant in South Carolina.

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