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At a seasonally adjusted annual rate of $557.5 billion, new construction starts in August slipped 3 percent from the previous month, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. The nonbuilding construction sector (public works and electric utilities) fell back after July’s strong performance, while residential building continued its lengthy decline. Running counter in August was improved activity for nonresidential building. Through the first eight months of 2008, total construction on an unadjusted basis was $387.4 billion, down 15 percent from the same period a year ago.

"Aside from further weakness for homebuilding, the construction start statistics this year have shown fluctuating activity for both nonbuilding construction and nonresidential building, and August was consistent with this pattern," according to Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. "While month-to-month there have been wide swings, on a year-to-date basis the nonbuilding sector has been flat and nonresidential building is still seeing some growth. In the latter case, the institutional and manufacturing categories have registered gains, outweighing to this point in 2008 mounting weakness for the commercial structure types."

Nonbuilding construction in August dropped 20 percent to $141.5 billion (annual rate), following the 27 percent jump reported in July. On the transportation side, bridge construction in August pulled back 31 percent, while highway construction slipped a modest 1 percent. Murray adds, "With the impending deficit in the Highway Trust Fund, highway and bridge construction was looking at a more difficult funding environment. To deal with this situation, Congress in early September approved an $8 billion transfer from the general fund to the trust fund, easing some of the downside risk."

Residential building, at $160.3 billion (annual rate), fell 12 percent in August. Single-family housing decreased an additional 3 percent, making it seven out of the first eight months of 2008 that weaker activity has been reported. Nonresidential building in August climbed 17 percent to $255.7 billion (annual rate).

On the negative side, the commercial categories (excluding hotels) showed these August reductions—warehouses, down 12 percent; stores, down 14 percednt; and offices, down 16 percent. On a year-to-date basis, the commercial categories showed this pattern—sharply lower activity for stores (down 25 percent) and warehouses (down 33 percent), a modest retreat for offices (down 3 percent), and more growth for hotels (up 34 percent) as the result of groundbreaking for a number of large hotel/casino projects this year.

"The credit crunch and weak economy in 2008 have had their most immediate impact on stores and warehouses, and some dampening is beginning to emerge for offices. The current wave of financial market distress will lead to a more extended period of tight lending standards, further depressing the amount of commercial buildings expected to reach groundbreaking through 2009," Murray adds. Nonresidential building in August also included weaker activity for healthcare facilities, down 11 percent; and public buildings (courthouses and detention facilities), down 10 percent.