April Construction Slips 1% According to McGraw-Hill Construction

June 11, 2009
The value of new construction starts fell 1 percent in April to a seasonally adjusted annual rate of $386.6 billion, according to McGraw-Hill Construction, New York

The value of new construction starts fell 1 percent in April to a seasonally adjusted annual rate of $386.6 billion, according to McGraw-Hill Construction, New York. The loss of momentum was due to a slower pace for public works construction, which had been lifted in March by the start of several large pipeline and rail projects. At the same time, nonresidential building in April picked up the pace after the very weak activity reported during the prior two months and residential building was helped by improvement in single-family housing.

“The pattern of construction starts over the past two months suggests a transition from extended declines to more of an up-and-down pattern, which generally takes place when a bottom gets established,” said Robert Murray, vice president of economic affairs for McGraw-Hill Construction. “This process of establishing a bottom is still in its early stages, and will be affected by how different construction sectors perform in coming months. The impact from the stimulus bill on public works construction is just beginning to emerge, with this sector expected to see more strength as 2009 proceeds. Single-family housing remains at a very low volume, but the worst of its correction appears to have passed. For nonresidential building, there’s been the occasional display of resilience by such institutional structure types as healthcare facilities and public buildings, but the downward trend for the commercial structure types is still very much underway.”

Nonbuilding construction. This segment dropped 19 percent in April to $114.7 billion (annual rate), following a 28 percent jump in March. The miscellaneous public works category in March had soared 318 percent, reflecting the start of two large natural gas pipeline segments valued at a combined $2.6 billion as well as the start of a $1.6 billion rail project. April construction activity in this segment included major pipeline projects: a $485 million segment of a petroleum pipeline in South Dakota, large electric power projects, including a $300 million gas-fired power plant in Florida, and a $170 million wind farm in West Virginia.

Nonresidential building. At $166.4 billion (annual rate), non residential building grew nine percent in April. The manufacturing building category provided much of the upward push, surging 222 percent, due to the start of a $1 billion upgrade to a centrifuge plant for uranium enrichment in Ohio. Excluding this large project, the manufacturing building category in April would be down seven percent, while the increase for nonresidential building would be lowered to one percent. There was still support to the nonresidential total in April coming from the institutional categories. Most noteworthy was a 49 percent increase for health-care facilities, pushed upward by four large hospital projects located in Indiana ($350 million), Illinois ($129 million), Texas ($125 million), and Louisiana ($121 million).

The public building category in April advanced 19 percent, aided by the start of a $289 million military headquarters facility in North Carolina and a $259 million courthouse tower in Arizona.

Residential building in April climbed eight percent to $105.5 billion (annual rate). The improvement was the result of a 13 percent gain for single family housing, which posted its second increase out of the past three months. This follows an extended period of decline from the start of 2006 through the start of 2009, when decreased activity was reported in 31 out of 36 months. The single-family pattern in April showed strengthening in all five major regions: the West, up 23 percent; the Midwest, up 20 percent; the South Atlantic and Northeast, each up nine percent; and the South Central, up eight percent. While the extended slide for single family housing may now be coming to a close, the correction for multi-family housing was still present in April, as contracting dropped an additional 11 percent. By region, the April weakness for multi-family housing was located in the South Atlantic, down 27 percent; the Northeast, down 18 percent; and the South Central, down 10 percent; while some improvement was shown in the West and Midwest, up three percent and 12 percent, respectively.