July Construction Recedes Two Percent Overall but Building Numbers GrowAugust 22nd, 2013 by Editor
According to the latest construction starts numbers, released by McGraw Hill Construction, new construction starts in July decreased 2 percent to a seasonally adjusted annual rate of $479.1 billion, according to the report. Nonresidential building strengthened in July, regaining some of the upward momentum that began to take hold in April and May, while residential building in July showed further growth. For the first seven months of 2013, total construction starts on an unadjusted basis were reported at $281.7 billion, up 1 percent from the same period a year ago. The year-to-date amount for total construction was restrained by a steep decline for new electric utility starts. If electric utilities are excluded, total construction starts for this year’s January-July period would be up 11 percent, reflecting a substantial increase for housing as well as moderate improvement for commercial building.
“July’s modest decline for total construction was the result of diminished activity for public works, which can be volatile on a month-to-month basis depending on the timing of very large projects,” says Robert A. Murray, vice president of economic affairs for McGraw Hill Construction. “Aside from the public works shortfall, the July statistics provided evidence that the hesitant expansion for construction is proceeding. Housing continues to show upward movement, and the pace of commercial building continues to pick up gradually from very low levels. The institutional building portion of nonresidential building, which generally weakened during the first half of 2013, strengthened in July, suggesting that it may now be starting to stabilize after a lengthy decline that’s lasted for more than four years. While the recovery for construction may be broadening in scope, the process continues to be tenuous given the ongoing sluggish condition of the U.S. economy.”
Commercial categories in July slipped 2 percent, due to varied behavior by project type. Office construction in July dropped 15 percent, although this followed a substantial 44 percent increase in June, and the level of activity in July was 21 percent higher than the average monthly pace for this category during 2012. Hotel construction in July fell 30 percent, registering comparatively weak activity after the elevated pace earlier in 2013. Store construction in July edged up 2 percent. The manufacturing plant category in July posted a further decline, falling 31 percent as the slower activity witnessed so far in 2013 continued.
Nonresidential building in July advanced 8 percent to $161.3 billion (annual rate). At the outset of 2013, nonresidential building lost momentum, and then showed moderate growth in April and May before slipping back again in June. The institutional building sector in July jumped 19 percent, as several categories reported sizeable gains. Healthcare facilities in July climbed 25 percent. The transportation terminal category in July surged 111 percent, while the public buildings category, which has recently been very weak, jumped 46 percent in July. Educational facilities, the largest institutional category, also contributed in July with a 3 percent increase, rising for the second month in a row after weak activity in early 2013. Institutional categories that weakened in July were churches, down 3 percent; and amusement-related construction, down 7 percent.
Residential building, at $204.1 billion (annual rate), grew 3 percent in July. Multifamily housing rebounded 20 percent after sliding 21 percent in June, regaining the heightened activity that was present earlier in 2013. Through the first seven months of 2013, the leading metropolitan areas for multifamily construction starts (ranked by dollar volume) were the following: New York, Washington, D.C., Boston, Miami and Dallas. Single-family housing in July slipped 1 percent, and over the past several months has essentially leveled off after the strong month-to-month gains that were reported throughout 2012 and early 2013. July’s volume of activity was still high by last year’s standards – up 26 percent from the average monthly pace for single-family housing reported during 2012. By region, single family housing in July showed greater activity in the Midwest, up 4 percent; but declines in the Northeast, South Central and West, each down 2 percent; and the South Atlantic, down 4 percent. Murray says, “The rise in mortgage rates in late spring generated some concern about the prospects for single-family housing, but mortgage rates have since eased back and the inventory of new homes for sale remains very low, which should encourage greater single-family construction in the months ahead.”
The 1 percent increase for total construction starts on an unadjusted basis during the first seven months of 2013 relative to last year was the result of divergent behavior by the three main construction sectors. Residential building, up 29 percent year-to-date, continues to lead the way during 2013, with single-family housing up 31 percent and multifamily housing up 21 percent. Nonresidential building saw its year-to-date shortfall relative to 2012 narrow, coming in 3 percent below last year at the seven-month mark. The major segments for nonresidential building showed the following year-to-date performance – commercial building, up 6 percent; institutional building, down 8 percent; and manufacturing plant construction, down 9 percent.
By geography, total construction starts in the first seven months of 2013 revealed gains in three regions – the West, up 9 percent; and the South Central and the Northeast, each up 8 percent. Year-to-date declines were reported for two regions – the Midwest, down 1 percent; and the South Atlantic, down 14 percent. If electric utilities are excluded from the construction start statistics in the South Atlantic, then that region would register a 20 percent year-to-date gain.