Not a Stellar First Half

There was no boom in June for the construction sector, as new construction starts that month dropped 3 percent compared to May, according to McGraw-Hill Construction, Bedford, Mass.

The construction information organization has reported declines in both the housing and non-building construction (infrastructure) sectors. Non-residential building advanced in June 2010, but remains below the 2009 pace of activity.

During the first half of 2010, the contract value of all construction starts was slightly less than $200 billion, down 4 percent compared to the first half of 2009, according to McGraw-Hill.

“The pattern of construction starts can still be viewed as showing low-level stability, although barely, as June came in at the bottom of the recent range of activity,” says Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.

“The improvement shown by single-family housing over the past year has stalled, at least for the present,” Murray continues. “With regard to non-building construction, the dollar amount of new electric utility projects has retreated, and it appears that the lift provided to transportation public works from the stimulus funding is leveling off.”

Although the non-residential uptick is encouraging, Murray is uncertain it’s a trend. “Renewed expansion for non-residential building on a sustained basis is not likely in the near term, given such ongoing constraints as tight bank lending, eroding state and local budgets and sluggish employment growth,” he says.

Part of the 13 percent decline in the infrastructure sector in June reflects a sharply lower amount of electric utility construction, which fell 64 percent relative to a strong May, according to McGraw-Hill. While June did include the start of a $367 million wind farm in Wisconsin and a $200 million gas-fired power plant in Texas, the boost arising from large projects was down substantially from May.

River/harbor development and several other public works categories demonstrated less activity in June compared to the month before. “On the plus side in June, highway and bridge construction advanced 3 percent while larger gains were reported for sewers (up 18 percent) and water supply systems (up 34 percent),” according to McGraw-Hill.

Spending in the health care sector was a bright spot in the non-residential building market in June. New contract values in the sector jumped 59 percent in June, with five projects valued in excess of $100 million starting in Kansas ($324 million), California ($200 million), Texas ($176 million), Kentucky ($121 million) and New Jersey ($120 million). “After the steep 33 percent correction in 2009, the health care facilities category is strengthening once again in 2010, helped by health care chains bringing deferred projects to groundbreaking, as well as the start of more government-owned hospitals.”

What McGraw-Hill defines as the amusement-related category also had a strong June, with new contract values boosted by the start of a $500 million renovation project at Madison Square Garden in New York.