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July Construction Starts Rise 6% Nationwide

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New construction starts in July climbed 6% to a seasonally adjusted annual rate of $588.8 billion, according to McGraw Hill Construction, a division of McGraw Hill Financial. Nonresidential building continued to advance, supported by yet another robust month for manufacturing plant projects as well as improvement for commercial building.

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The nonbuilding construction sector (public works and electric utilities) also advanced, helped by the start of a large mass transit rail project. At the same time, residential building was unchanged from its pace in June. For the first seven months of 2014, total construction starts on an unadjusted basis were reported at $311.6 billion, a 4% gain compared to the same period a year ago.

The July statistics raised the Dodge Index to 125 (2000=100), up from a revised 118 for June, and marking the highest level for the Dodge Index so far in 2014.

“The construction expansion this year is getting more of a contribution from nonresidential building,” said Robert A. Murray, chief economist and vice president for McGraw Hill Construction. “Manufacturing plant construction is seeing the start of numerous chemical and energy-related projects, consistent with the nation’s growing energy sector. Commercial building is maintaining its upward momentum from low levels while institutional building, with its up-and-down pattern, appears to be stabilizing after a lengthy decline.

“With residential building being limited so far in 2014 by the sluggish single family market, the further growth for nonresidential building has been needed to keep the construction expansion going,” Murray said.  “As for public works, this year’s pullback has stayed moderate, helped in part by the ongoing strength for mass transit work. The recent passage of a $10.8-billion ‘patch’ by

Congress to shore up the Highway Trust Fund through May 2015 should also help to keep this year’s public works downturn from getting much more severe,” he said.

Nonresidential Building

Nonresidential building in July increased 7% to $229.0 billion (annual rate), showing further growth on top of the 12% increase reported in June. The manufacturing plant category jumped 44%, reflecting the start of still more chemical and energy-related facilities, including these projects in Texas—a $3-billion petrochemical plant in Baytown and a $1.7-billion ethylene plant in Freeport.

Other large manufacturing projects entered as July starts included a $450-million semiconductor facility in Hillsboro, Ore., and a $370-million ore processing plant in Corpus Christi, Texas. The commercial building group in July rose 11%, resuming its upward trend after retreating in June.

Hotel construction in July climbed 29%, helped by groundbreaking for a $190-million hotel-time share tower in Honolulu and $114 million for the hotel portion of a $300-million mixed-use building in Los Angeles. Store construction improved 12%, aided by the start of a $49-million mall addition in Denver.

Office construction grew 8%, supported by the start of $252 million for the office portion of a $420-million, mixed-use building in Minneapolis and $170 million for the office portion of a $225-million, mixed-use building in Dallas.  Warehouse construction was the one commercial project type not able to report a July gain, as it slipped 13%.

The institutional building group as a whole dropped 14% in July, retreating after growing 12% during the previous two months. Health-care facilities fell 34% from a heightened June amount that featured the start of a $900-million hospital campus in San Francisco. In contrast, educational building in July advanced 11%, supported by groundbreaking for such projects as a $130-million addition and renovation for a high school in Winchester, Mass., a new $94-million high school in Centerton, Ark., and a new $86-million  high school in Laramie, Wyo.

Through the first seven months of 2014, the dollar amount of new high school construction projects for the nation was up 10%, contributing to a 7% year-to-date gain for the overall educational building category. The July pattern for the smaller institutional project types was mixed. Transportation terminal construction grew 39%, lifted by the start of a $55-million renovation of an intermodal facility in Springfield, Mass., and church construction increased 19% from the previous month’s weak amount.

On the negative side, the public buildings category retreated 12% while amusement-related construction dropped a more substantial 45% after a strong June that included the start of a $375-million arena in Las Vegas.  Despite its steep decline, amusement-related construction did include the July start of a $129-million casino in Jamul, Calif.

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