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Sliding Back

New construction starts in June retreated 1 percent to a seasonally adjusted annual rate of $552 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. Nonresidential building fell 12 percent after its elevated May pace, pulling down total construction. Meanwhile, residential building registered a modest 2 percent gain in June, and a more substantial 19 percent increase was reported for nonbuilding construction. During the first six months of 2008, total construction on an unadjusted basis came in at $282.1 billion, down 16 percent from a year ago. Excluding residential, new construction starts in the first six months of 2008 were up 3 percent.

"The pattern of activity during the first half of 2008 featured wide swings month-to-month for nonresidential building and nonbuilding construction, often due to the impact of unusually large projects," says Robert A. Murray, VP of economic affairs for McGraw-Hill Construction. "In May, nonresidential building was the beneficiary of several huge projects that reached groundbreaking, while in June this was the case for nonbuilding construction. In contrast to such up-and-down behavior, residential building during the first half of 2008 was consistently depressed, and despite June’s slight upturn it’s expected that homebuilding will see continued weakness in coming months."

Nonresidential building in June was $233.2 billion (annual rate), a 12 percent decline that followed a 32 percent jump in May, while residential building, at $179 billion (annual rate), rose 2 percent in June as the result of moderate improvement for multifamily housing. Helped by start of three large projects in New York (valued at $150 million, $116 million, and $100 million, respectively), plus the start of a $139 million residential complex in Salt Lake City, multifamily housing in June climbed 11 percent. However, single family housing slipped an additional 1 percent, as the lengthy correction for homebuilding remains very much in progress.

For the first half of 2008, residential building was down 39 percent from the same period a year ago. Single family housing during this time fell 38 percent, and multifamily housing in the January-June period was down 41 percent in dollar volume, as the amount of large-scale multifamily projects (mostly condominiums) that reached groundbreaking has fallen substantially. The construction start statistics indicate that during the first half of 2008 there were 12 multifamily projects valued at $100 million or more, compared to 21 such projects during the first half of 2007.

Nonbuilding construction in June was $139.9 billion, a 19 percent rise that reflected greater activity for power plants, pipelines and sewers. For the first six months of 2008, nonbuilding construction came in 3 percent below the same period a year ago. Highway construction retreated 7 percent, while the bridge category was down 18 percent from the first half of 2007.

For total construction, the 16 percent drop for the U.S. in the first half of 2008 reflected double-digit declines in three regions—the South Atlantic, down 28 percent; the West, down 26 percent; and the Midwest, down 11 percent. The South Central was down a more moderate 4 percent year-to-date, while the Northeast stood apart from the other regions by advancing 5 percent.