February Construction Starts Unchanged From Previous Month
At a seasonally adjusted annual rate of $486.7 billion, new construction starts in February were essentially the same as January’s amount, according to McGraw Hill Construction, a division of McGraw Hill Financial.
After the strong finish to last year, the construction start statistics have shown lackluster activity during the first two months of 2014. 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% 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,” said 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.
“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,” Murray said.
“For nonbuilding construction, the prospects for renewed growth in 2014 are more limited, given the comparison to 2013, which included the start of several massive public works projects, in combination with the continued retrenchment for new electric utility starts underway after the record high reached back in 2012,” he said.
Nonresidential building in February dropped 9% to $141.9 billion (annual rate), sliding back for the third month in a row after the heightened volume registered last fall. The volatile manufacturing plant category, plunging 75%, was responsible for much of February’s nonresidential building decline. If manufacturing plant construction is excluded, then nonresidential building in February would be up 4%. January’s manufacturing plant amount had been boosted by the start of a $1.2-billion propane dehydrogenation facility in Texas; in contrast, the largest manufacturing project reported as a February start was a $143-million medical products plant, also in Texas.
Commercial building in total climbed 10% in February, helped by gains for offices, warehouses and hotels. Office construction advanced 17%, helped by groundbreaking for several large office buildings, located in Albany, N.Y. ($103 million), San Antonio ($92 million), and Waltham, Mass. ($50 million). Warehouse construction jumped 43%, lifted by the start of a $79-million Nordstrom fulfillment center in Elizabethtown, Pa. Hotels rose a moderate 8%, aided by the start of a $40-million Hyatt hotel in Denver. Store construction, receding 1%, was not able to contribute to February’s commercial building gain.
The institutional categories on balance in February held steady with the previous month, due to mixed behavior by project type. Educational facilities retreated 9%, although the latest month did include the start of a $136-million high school renovation project in Long Beach, Calif., an $85-million research lab in Maplewood, Minn., and a $68-million high school in Cambridge, Mass.
Health care facilities fell 5% in February, despite the start of a $118-million ambulatory care clinic in Minneapolis.
The smaller institutional categories in February were led by an 86% jump for miscellaneous nonresidential buildings, reflecting the start of a $146-million renovation project at the New York Aquarium in Brooklyn. Gains were also reported for churches and public buildings, each up 12% from weak January activity, although amusement-related work slipped 5%.