February Construction Unchanged from January, McGraw Hill Reports

March 26th, 2014 by Editor

At a seasonally adjusted annual rate of $486.7 billion, new construction starts in February were nearly the same as in January, according to McGraw Hill Construction, a division of McGraw Hill Financial.

According to the report, the flat pace for total construction starts in February was due to a mixed performance by major sector—less nonresidential building, but more housing and public works. For the first two months of 2014, total construction starts on an unadjusted basis were reported at $66.7 billion, down 3 percent from the same period a year ago.

February’s data kept the Dodge Index at 103 (2000=100), remaining below the full year 2013 average for the Index at 111.

“While construction activity has generally trended upward over the past two years, the monthly pattern has frequently been hesitant, and early 2014 has turned out to be one of those hesitant

periods,” says Robert A. Murray, chief economist for McGraw Hill Construction. “To some extent, the harsh winter weather has played a role in dampening construction activity, particularly as it relates to single-family housing. At the same time, multifamily housing in early 2014 has been able to strengthen further.”

Residential building, at $213.8 billion (annual rate), increased 3 percent in February, as 17-percent growth for multifamily housing outweighed a slight 1-percent drop for single-family housing. According to the report, the slight 1-percent decline for single-family housing in February, compared to a steeper 4-percent drop in January, suggests that single-family housing may now be starting to stabilize after showing decreasing activity during the three previous months.

“The most recent weakness for single-family housing can be attributed to tough weather conditions in parts of the U.S., and it’s expected that single family housing will regain its previous upward track very soon,” says Murray. “Still, the demand for single-family housing arising from potential first-time homebuyers may be restrained going forward, due to such factors as continued tight bank lending standards for mortgages and the high student loan debt faced by many in this group.”

He continues, “For nonresidential building, the upturn so far has been much more gradual and subject to setback, such as what took place in this year’s first two months. Still, the commercial building sector is seeing rising occupancies and rents, and the improved fiscal health of states and more financing from bond measures should help the institutional building sector stabilize, which would enable nonresidential building to soon regain upward momentum.”

Nonresidential building in February dropped 9 percent to $141.9 billion (annual rate), sliding back for the third month in a row after the heightened volume registered last fall. The manufacturing plant category plunged 75 percent and was responsible for much of February’s nonresidential building decline, according to the report. If manufacturing plant construction is excluded, then nonresidential building in February would be up 4 percent.

Commercial building in total climbed 10 percent in February, helped by gains for offices, warehouses and hotels. Office construction advanced 17 percent. Warehouse construction rose 43 percent. Hotels rose 8 percent, and store construction dropped 1 percent.

Educational facilities decreased by 9 percent, while gains were reported for churches and public buildings, each up 12 percent from weak January activity.

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