August Construction Rises 2%
New York, N.Y. – September 18, 2009 – At a seasonally adjusted annual rate of $429.8 billion, new construction starts in August advanced 2% from the previous month, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. The upward push came from nonbuilding construction, comprised of public works and electric utilities, which has shown an up-and-down pattern for much of 2009. Meanwhile, both housing and nonresidential building in August settled back slightly from the improved levels that were reported in July.
The August data lifted the Dodge Index to 91 (2000=100), up from July’s 89 and June’s 82. While heading upward, the pace of contracting in August was still 22% below the 117 reading for the Dodge Index for full year 2008. “The volume of construction starts remains quite weak, but since March there’s been growing evidence that activity has at least leveled off, and may now be gradually trending upward,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “Public works construction has seen the early signs of support from the federal stimulus funding, with more strengthening expected in coming months. Single family housing apparently reached bottom in early 2009, and has now moved upward in six out of the past seven months. For nonresidential building, the positive development is that the rate of descent has eased from the severe declines witnessed in late 2008 and early 2009. At the same time, nonresidential building still faces considerable constraints, such as mounting vacancies, tight bank lending standards, and eroding state fiscal health.”
Nonbuilding construction in August jumped 13% to $138.9 billion (annual rate). Highway construction climbed 12%, and for the first eight months of 2009 was up 4% compared to last year. While bridge construction retreated 9% in August, it was able to register a 7% increase for the first eight months of 2009 due to earlier gains. Water supply construction had a strong August, advancing 38%, which marked a change from the diminished contracting for this project type during much of 2009. Helping to lift the water supply category in August was the start of a $113 million water supply main in Maryland and a $74 million water treatment plant in Kansas. Sewer construction in August grew 12%, helped by a $100 million water reclamation plant in Maryland. On the negative side for public works, river/harbor development work dropped 9% and “miscellaneous” public works (mass transit, airport runways, site work, etc.) fell 13% in August. The miscellaneous public works category did include one large August entry – the start of a $204 million runway rehabilitation project at New York’s JFK International Airport. Electric utility construction had a brisk August, soaring 120%. Large electric utility projects reported as August starts included a $600 million power plant in Arizona, plus the start of three large wind farms located in Pennsylvania ($400 million), North Dakota ($250 million), and Iowa ($150 million).
Residential building, at $127.2 billion (annual rate), slipped 1% in August. Multifamily housing retreated 13% from a July that had been aided by groundbreaking for two large multifamily projects valued each in excess of $100 million. August did include several large multifamily projects, such as a $98 million project in the Bronx NY and the $84 million residential portion of a $250 million mixed-use project in Washington DC, but in general the number of large multifamily projects continues to be down considerably from recent years. During the first eight months of 2009, there were a total of 6 multifamily projects valued at $75 million or more that reached groundbreaking, compared to 33 such projects in the same period of 2008 and 57 such projects in the same period of 2007. Single family housing in August grew 1%, marking the sixth gain in dollar terms out of the past seven months. The August level for single family housing remained 11% below last year’s monthly average. By region, single family housing showed August gains in the Midwest (up 4%), the South Central (up 3%), and the West (up 2%); no change for the Northeast; and a decline for the South Atlantic (down 4%).
Nonresidential building in August fell 3% to $163.6 billion (annual rate). Much of the pullback occurred in the institutional sector, which had been boosted in July by groundbreaking for several large hospital and medical center projects. Healthcare facilities construction in August plunged 59% after its strong July, returning to the weaker activity that’s been present for much of 2009. Through the first eight months of 2009, the healthcare facilities category was down 31% from a year ago. Other August declines for institutional building were – public buildings, down 20%; churches, down 24%; and amusement-related projects, down 35%. Running counter in August was the educational building category, which climbed 9%. Supporting the educational building rise was the start of a $500 million medical research facility for the U.S. Army in Frederick MD, a $136 million university science building in Chapel Hill NC, and a $102 million research center at Aberdeen Proving Grounds MD. Also running counter in August was the transportation terminal category, increasing 160% as the result of $680 million related to foundation work at the Fulton Street Transit Center in New York NY.
The commercial categories in August included a moderate decline for warehouses (down 7%), but also gains for hotels (up 1%) and stores (up 15%), both of which still continued to be very depressed in terms of their level of activity. The office building category in August registered a surprising 63% gain, lifted by the start of four large projects. These included a $500 million data center in Malden NC, a $133 million public administration building in San Francisco CA, the $130 million office portion of the $250 million mixed-use project in Washington DC, and a $110 million administration building at Andrews Air Force Base MD. The manufacturing plant category also had a large percentage gain in August, soaring 206% from an extremely depressed amount in July. Boosting the manufacturing total in August was the start of a $500 million upgrade to a semiconductor plant in New Mexico.
On an unadjusted basis, total construction during the January-August period of 2009 was $274.8 billion, down 33% from the same period a year ago. The year-to-date declines have become smaller in recent months, and this trend should continue as the comparison is made against the steep slide in activity that took place during the fall of 2008. By major sector, the largest shortfall continued to be shown by residential building, down 40% in the first eight months of 2009. Nonresidential building was not far behind with a 37% year-to-date decline, as the result of this performance by segment – commercial, down 52%; manufacturing, down 74%; and institutional, down 17%. Nonbuilding construction in the first eight months of 2009 fell 18%, with public works slipping 8% while electric utilities plunged 54%. By region, total construction registered this year-to-date pattern – the Northeast, down 37%; the South Atlantic and the South Central, each down 33%; and the Midwest and the West, each down 31%.
August 2009 Construction Starts
AUGUST 2009 CONSTRUCTION STARTS
MONTHLY SUMMARY OF CONSTRUCTION STARTS
Prepared by McGraw-Hill Construction Research & Analytics
Monthly Construction Starts
Seasonally Adjusted Annual Rates, In Millions of Dollars
| August 2009 | July 2009 | % Change | |
| Nonresidential Building | $163,595 | $168,168 | -3 |
| Residential Building | 127,242 | 129,083 | -1 |
| Nonbuilding Construction | 138,938 | 122,853 | +13 |
| Total Construction | $429,775 | $420,104 | +2 |
The Dodge Index
(2000=100, Seasonally Adjusted)
August 2009 ........................... 91
July 2009................................. 89
YEAR-TO-DATE CONSTRUCTION STARTS
Unadjusted Totals, In Millions of Dollars
| 8 Mo. 2009 | 8 Mo. 2008 | % Change | |
| Nonresidential Building | $110,465 | $175,885 | -37 |
| Residential Building | 73,015 | 122,343 | -40 |
| Nonbuilding Construction | 91,322 | 111,785 | -18 |
| Total Construction | $274,802 | $410,013 | -33 |
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