AWI e-briefs - 07/02/2009 (Plain Text Version)

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Industry News

May Construction Climbs 7%

At a seasonally adjusted annual rate of $412.3 billion, new construction starts in May advanced 7% from the previous month, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies.  May’s strengthening was led by a substantial increase for public works, which featured a major pipeline project as well as gains for highways, bridges, sewers, and water supply systems.  Meanwhile, housing stayed flat and nonresidential building resumed its downward trend after the brief upturn reported in April.

The May statistics lifted the Dodge Index to 87 (2000=100), compared to 82 for April.  The pace of new construction starts had fallen steadily from mid-2008 through February, but since then has shown slight if hesitant improvement.  However, the level of activity registered during March, April, and May remains weak by recent standards – up 4% from the average for January and February, yet still down 10% from last year’s fourth quarter.  "The pattern of construction starts over the past three months suggests that a bottom is being established," stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.  "Single family housing now seems to be leveling off after its lengthy correction, and public works is picking up speed, with more to come given the lift that’s just beginning to emerge from the federal stimulus funding.  This will be offset, however, by further weakness for nonresidential building, involving its commercial, manufacturing, and institutional segments."

The commercial categories in May ran counter to their downward trend that’s been underway over the past year.  Store construction, which has seen a particularly steep drop after peaking in 2007, held steady in May.  Both warehouses and hotels showed gains from very weak April activity, with warehouses up 5% and hotels up 31%.  Office construction in May climbed 51%, lifted by the start of a $347 million office tower in New York, NY and a $99 million officer tower in Seattle WA.  The volume of office construction in May was still depressed relative to the past year, as it came in 35% below the monthly average for this category in 2008.

On an unadjusted basis, total construction during the January-May period of 2009 was reported at $154.2 billion, down 38% from the same period a year ago.  The year-to-date declines are likely to stay substantial through mid-year, but then become less severe during the second half of 2009 given the comparison to the sharp erosion in construction activity that took place in the second half of 2008.  By sector, nonbuilding construction for the first five months of 2009 showed a relatively small decline, retreating 14%.  The downturns for the other two sectors were considerable –residential building, down 49%; and nonresidential building, down 43%.  By region, total construction during the first five months of 2009 showed the largest reductions in the northeast, down 45%; and the south Atlantic, down 41%.  Not far behind were the west, down 39%; the south central, down 34%; and the midwest, down 29%.

For more information, visit McGraw Hill.  [Return to top]