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November Construction Slips 5 Percent Nationwide

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At a seasonally adjusted annual rate of $421.3 billion, new construction starts in November fell 5% from the previous month, according to McGraw-Hill Construction, a division of The McGraw-Hill Cos. The downturn came as the result of decreased activity for public works, following this sector’s elevated amount in October.

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Meanwhile, both nonresidential building and housing registered modest growth in November. During the first 11 months of 2012, total construction starts on an unadjusted basis were reported at $424.4 billion, up 3% compared to the same period a year ago.

The November data lowered the Dodge Index to 89 (2000=100), down from a revised 94 for October. Over the first 11 months of 2012, the Dodge Index averaged 97.

“The current year has seen an up-and-down pattern for construction starts, and November qualifies as one of this year’s weaker months,” said Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “Much of the recent variation has been related to unusually large projects in a given month, and the absence of such projects in November for public works and electric utilities contributed to the slowdown for overall construction. At the same time, nonresidential building in November showed improvement after its loss of momentum during the prior two months, and housing continues to strengthen.”

Nonbuilding Construction

Nonbuilding construction in November dropped 24% to $100.6 billion (annual rate), retreating to its lowest amount so far in 2012. The environmental public works categories in November were particularly weak, with large declines for sewer construction, down 21%; river/harbor development, down 29%; and water supply systems, down 37%. The “miscellaneous public works” category, which is comprised of such diverse project types as pipelines, mass transit, and outdoor sports stadiums, fell 56% in November.

Miscellaneous public works had been boosted in October by $2.0 billion related to work on the Keystone Pipeline Gulf Coast Expansion (located in Oklahoma and Texas); by contrast the largest miscellaneous public works project in November was a $70-million stadium addition at Louisiana State University in Baton Rouge, La. Highway construction in November dropped 8%, sliding back after being lifted in October by the start of work on the I-95 HOV/HOT Lanes project in Virginia. Bridge construction was the only public works category to post a November gain, climbing 12% with the help of a $245-million bridge replacement project in Quincy, Mass.

The electric utility category in November weakened further, dropping 8% after a steep 93% plunge in October. Due to the strength reported earlier in the year, the electric utility category in 2012 has already achieved a new annual high in current dollars, even with the depressed activity reported for October and November.

During the first 11 months of 2012, nonbuilding construction was up 1% from the same period a year ago. While public works construction year-to-date was down 1%, it was offset by a 4% gain for electric utilities. Four of the six public works categories showed year-to-date declines – bridge construction, down 3%; highways, down 9%; sewer construction, down 12%; and river/harbor development, down 21%. The two public works categories reporting year-to-date increases were water supply systems, up 7%; and miscellaneous public works, up 41%. The large gain for miscellaneous public works reflected a sharp rise in the amount of pipeline and rail-related work.

Nonresidential Building

Nonresidential building, at $136.8 billion (annual rate), climbed 4% in November. The institutional sector, which had been trending downward throughout much of 2012, strengthened in November. The educational building category advanced 16%, helped by such projects as a $180-million medical research facility in Cincinnati, an $88-million building renovation at the University of Chicago in Chicago, and an $87-million high school in Franklin, Mass. 

Health-care facilities in November climbed 13%, reflecting the lift coming from the $651-million Veterans Administration Medical Center in New Orleans and a $145-million hospital in Rochester, N.Y. Other gains in November were reported for amusement-related projects, up 19%; and transportation terminal work, up 16%. Declines in November were reported for public buildings (courthouses, detention facilities, and military projects), down 48%; and churches, down 3%.

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