Construction flatline to continue for 2012

WASHINGTON, D.C. – A year ago and beyond, prognosticators were eyeing 2012 as the breakout year for improved U.S. construction activity.

Unfortunately, that’s not gonna happen, according to the 2012 McGraw-Hill/Dodge Construction Outlook, which was released Oct. 19.

Construction starts in 2012 are expected to be “essentially flat,” vs. 2011 the report says, coming in at a value of $412 billion. This year the value of construction starts is expected to come in at $410 billion, a 4 percent decline from 2010. Relatively level activity in 2010 “raised the expectation that we might be on the verge of recovery,” said Robert A. Murray, McGraw-Hill Construction’s vice president of economic affairs. But “the construction industry has struggled to see any kind of recovery take hold over the past couple of years.”

Murray said the construction industry continued to “essentially bounce along the bottom” in 2011, “so this has been somewhat of a disappointment because the expectation was that recovery was beginning to take place in 2011, and that has not occurred.”

He said some there have been some bright spots to take note of, including rising apartment construction, and improvement in manufacturing plant and power plant construction “but this work has not been enough to outweigh the negatives elsewhere.”

McGraw Hill predicts for 2012:

• Single family housing in 2012 will improve 10 percent in dollar value.
• Multifamily housing will rise 18 percent, continuing its moderate, upward trend.
• Commercial building will grow 8 percent. Warehouses and hotels will see the largest percentage increases, but improvement for offices and stores will be modest.
• The institutional building market will slip an additional 2 percent in 2012, after falling 15 percent in 2011. The tough fiscal environment for states and localities will continue to dampen school construction, and the uncertain economic environment will limit growth in healthcare facilities.
• Manufacturing buildings will increase 4 percent, following a 35 percent gain in 2011, as the low value of the U.S. dollar continues to support export growth.
• Public works construction will drop a further 5 percent, after a 16 percent decline in 2011, due to spending cuts and the absence of a multi-year federal transportation bill for highway and bridge construction.
• Electric utilities will retreat 24 percent, following a 48 percent jump in 2011.

The Associated General Contractors reported on Oct. 3 that construction spending increased by 1.4 percent between July and August and was up 0.9 percent compared to August 2010. But AGC CEO Stephen Sandherr said the decline in public sector construction spending “is dragging down the entire construction industry. If it wasn’t for the modest increase in private sector demand, the hard hit construction industry would be in much worse shape this year.”