New construction starts in July decreased 2% to a seasonally adjusted annual rate of $479.1 billion, according to McGraw Hill Construction, a division of McGraw Hill Financial.
The nonbuilding construction sector, comprised of public works and electric utilities, pulled back in July after being lifted in June by several very large projects. At the same time, nonresidential building strengthened in July, regaining some of the upward momentum that began to take hold in April and May, while residential building in July showed further growth.
For the first seven months of 2013, total construction starts on an unadjusted basis were reported at $281.7 billion, up 1% from the same period a year ago. The year-to-date amount for total construction was restrained by a steep decline for new electric utility starts. If electric utilities are excluded, total construction starts for this year’s January-July period would be up 11%, reflecting a substantial increase for housing as well as moderate improvement for commercial building.
The July statistics lowered the Dodge Index to 101 (2000=100), down from a revised 103 for June. During the first seven months of 2013, the Dodge Index averaged 102, slightly higher than the full year average for 2012 at 101.
“July’s modest decline for total construction was the result of diminished activity for public works, which can be volatile on a month-to-month basis depending on the timing of very large projects,” said Robert A. Murray, vice president of economic affairs for McGraw Hill Construction. “Aside from the public works shortfall, the July statistics provided evidence that the hesitant expansion for construction is proceeding. Housing continues to show upward movement, and the pace of commercial building continues to pick up gradually from very low levels.
“The institutional building portion of nonresidential building, which generally weakened during the first half of 2013, strengthened in July, suggesting that it may now be starting to stabilize after a lengthy decline that’s lasted for more than four years. While the recovery for construction may be broadening in scope, the process continues to be tenuous given the ongoing sluggish condition of the U.S. economy,” Murray said.
Nonresidential building in July advanced 8% to $161.3 billion (annual rate). At the outset of 2013, nonresidential building lost momentum, and then showed moderate growth in April and May before slipping back again in June. The institutional building sector in July jumped 19%, as several categories reported sizeable gains. Health care facilities in July climbed 25%, boosted by groundbreaking for such large projects as a $450-million hospital tower in Stamford, Conn., a $340-million medical center in Fargo, N.D., a $130-million hospital tower in Springfield, Mo., and a $120-million hospital tower in Washington, D.C.
This stands in contrast to the generally fewer large-scale hospital projects that were being reported as construction starts during the first half of 2013, when compared to what took place in 2012. The transportation terminal category in July surged 111%, helped by the start of the $650-million Central Subway Station in San Francisco and $105 million for work at Terminal 3 at San Francisco International Airport. The public buildings category, which has recently been very weak, jumped 46% in July with the start of a $137-million renovation project at the Minnesota State Capitol Building in St. Paul, Minn.
Educational facilities, the largest institutional category, also contributed in July with a 3% increase, rising for the second month in a row after weak activity in early 2013. Large educational facility projects that were included as July starts included $218 million for phase 3 of the University of Maryland Health Sciences Research Facility in Baltimore, a $92-million high school in Concord, Mass., and an $85-million high school addition in Bellevue, Wash. Institutional categories that weakened in July were churches, down 3%; and amusement-related construction, down 7%.
The commercial categories in July slipped 2%, due to varied behavior by project type. Office construction in July dropped 15%, although this followed a substantial 44% increase in June, and the level of activity in July was 21% higher than the average monthly pace for this category during 2012.
Large office projects that were included as July starts included $550 million for the office portion of the State Farm Headquarters complex in Richardson, Texas, plus two office buildings for Amazon in Seattle valued respectively at $133 million and $111 million.
Hotel construction in July fell 30%, registering comparatively weak activity after the elevated pace earlier in 2013. Store construction in July edged up 2%, helped by the start of a $70-million IKEA store in Merriam, Kan., while warehouse construction climbed 36%.
The manufacturing plant category in July posted a further decline, falling 31% as the slower activity witnessed so far in 2013 continued. The largest manufacturing plant project reported as a July start was a $63-million ethanol refinery in Florida.