At a seasonally adjusted annual rate of $435.4 billion, new construction starts in February dropped 7% from the previous month, according to McGraw-Hill Construction, a division of The McGraw-Hill Cos.  The loss of momentum was present in two of construction’s three main sectors – nonresidential building and nonbuilding construction (public works and electric utilities).

Meanwhile, the housing sector in February continued to strengthen. For the first two months of 2013, total construction starts on an unadjusted basis came in at $62.4 billion, up 5% from the same period a year ago. The February statistics lowered the Dodge Index to 92 (2000=100), down from 99 in January. For all of 2012, the Dodge Index averaged 99. 

“Over the past year, the construction industry has shown signs of renewed expansion, but diminished activity in January and February indicates that the upward trend remains hesitant,” said Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “The broad pattern for construction starts is dependent upon the performance of its main sectors, and right now only housing is strengthening in a sustained manner. For nonresidential building, the commercial structure types are showing improvement, but the institutional side of the market is still being restrained by tight state and local budgets. 

"For nonbuilding construction, the public works categories are dealing with flat-to-reduced funding support from the federal government, and new electric utility starts are in the process of pulling back from the record pace reported last year. While total construction starts are expected to see more growth in 2013, the gain will likely stay gradual as a result of this divergent behavior by construction’s main sectors,” Murray said.

Nonresidential Building

Nonresidential building in February retreated 6% to $139.7 billion (annual rate). The manufacturing plant category, which can be volatile on a month-to-month basis, plunged 79%, given the absence of large projects reported as construction starts for the month. While January had included a $550-million methanol plant and a $235-million cellulosic ethanol plant, the largest manufacturing project reported as a February start was a $22-million chemical and gas products warehouse in Florida.

For the institutional categories, education-related construction in February was unchanged from the previous month, at a pace down 6% from its average monthly amount during 2012. February did include several large education-related projects, such as an $83-million research laboratory in Cambridge, Mass., a $75-million high school modernization in Auburn, Wash., and a $60-million renovation for the Boston University Law School building in Boston, but these were not enough to lift the educational building category.

Health-care facilities construction in February slipped 5%, remaining at a lackluster volume despite the start of a $179-million ambulatory care center at Andrews Air Force Base in Maryland and a $97-million hospital renovation in New Orleans. The smaller institutional categories in February showed these declines – public buildings, down 10%; churches, down 12%; and transportation terminals, down 27%. The one institutional category that registered a February increase was amusement-related work, which rose 6%.

The commercial categories in February witnessed a mixed performance.  Office construction climbed 14%, boosted by several large projects. These included the $192-million Social Security Administration’s National Support Center in Urbana, Md., a $150-million office tower in New York City, and an $80-million technology center in Palm Bay, Fla. Store construction in February rose 12%, reflecting the start of a $150-million town center shopping mall in Sarasota, Fla. On the negative side, hotel construction in February retreated 19%, even with the start of a $165-million casino resort project in Lake Charles, La. A steeper February decline was reported for commercial warehouse construction, which dropped 36%.

Nonbuilding Construction

Nonbuilding construction, at $98.1 billion (annual rate), plunged 32% in February. The electric power category fell sharply, plummeting 68% from its January pace, as February included the start of only one very large project – a $500-million transmission line in Minnesota and Wisconsin. After registering consistently robust activity during the first half of 2012, electric utility construction is now seeing more of an up-and-down pattern, indicative of an emerging downward trend.

The public works categories overall in February dropped 25%, following the brief improvement in January. New highway and bridge construction starts in February were down 31%, after being lifted in January by a $1.4-billion tunnel project in Norfolk, Va., and the $235-million upper-deck replacement of the Verrazano-Narrows Bridge in New York City.