January Construction Slides 13 Percent

February 25th, 2014 by Editor

The value of new construction starts fell 13 percent in January to a seasonally adjusted annual rate of $485.0 billion, according to McGraw Hill Construction, a division of McGraw Hill Financial. The downturn followed a healthy performance in December, which was the third highest month for total construction starts during 2013. January’s retreat encompassed all three main construction sectors, with moderate declines reported for nonresidential building and housing. On an unadjusted basis, total construction starts in January came in at $34.1 billion, down 5 percent from the same month a year ago, according to the report.

The January statistics lowered the Dodge Index to 103 (2000=100), compared to a revised 118 for December and below the average Index reading of 110 for all of 2013.

“The year 2014 began slowly, due to behavior specific to each of the three main construction sectors,” says Robert A. Murray, chief economist for McGraw Hill Construction. “Nonresidential building in 2013 advanced 7 percent, but the progress was occasionally hesitant, including sluggish activity at the end of last year that carried over into January. At the same time, the prospects for continued growth for nonresidential building during 2014 are generally

positive, helped by receding vacancies for commercial properties and some improvement in the fiscal health of state governments.”

He continues, “Residential building in 2013 climbed 24 percent, but towards the end of last year growth began to decelerate as mortgage lending to first-time homebuyers remained stringent. The January slowdown for housing was due in part to tough winter weather conditions, yet the deceleration in recent months bears watching going forward.”

Nonresidential building in January dropped 6 percent to $157.3 billion (annual rate), and was down 7 percent from last year’s average monthly pace. The commercial building sector in January fell 13 percent, with declines from the prior month shown by hotels, down 43percent, and warehouses, down 3 percent. Hotels and warehouses posted strong percentage growth during 2013, with each rising 29 percent.

The commercial building sector saw a 21 percent increase for office construction in January.

The institutional building sector in January decreased 12 percent, and the educational building category receded 3 percent. Healthcare facilities dropped 17 percent for the month.

Residential building, at $204.7 billion (annual rate), slipped 2 percent in January. The retreat came as the result of a 6-percent decline for single-family housing, according to the report.

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