New construction starts in March came in at a seasonally adjusted annual rate of $404.9 billion, essentially the same pace as February, according to McGraw-Hill Construction, a division of The McGraw-Hill Cos. While total construction was unchanged from the prior month, this steady pattern came as the result of divergent behavior by construction�s three main sectors. Nonresidential building in March increased sharply, following its subdued activity earlier this year, but declines were registered by housing and nonbuilding construction (public works and electric utilities). Through the first three months of 2011, total construction on an unadjusted basis was reported at $88 billion, down 10% from the same period a year ago. The March data produced a reading of 86 for the Dodge Index (2000=100), the same as February. Since 2009, the Dodge Index has hovered within the range of 81 and 96.
“This period of low-level stability is looking to be more and more extended, pushing back the time when renewed expansion for overall construction activity is likely to take hold,” said Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “Public works had initially offset some of the weakness shown by other types of construction, but it’s now beginning to lose momentum, given waning support from the federal stimulus act, tight state budgets, and cutbacks in federal funding included in the recently approved fiscal 2011 appropriations. While multifamily housing has strengthened in hesitant fashion, single-family housing continues to be stalled. For nonresidential building, there’s still the downward pull coming from the institutional categories, but on the plus side commercial building seems to have already reached bottom, and the gains for commercial building in March would appear to be a positive development going forward. The note of caution for commercial building is that market fundamentals such as occupancies have only just begun to improve, and banks remain very cautious with regard to lending for new projects.”