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Slow mo: Industry momentum hard to find

Date Posted: March 5 2010

The value of new construction starts slipped 1% in January to a seasonally adjusted annual rate of $419.3 billion, McGraw-Hill Construction reported on Feb. 19.

The slight loss of momentum was due to a pullback for non-building construction (public works and electric utilities), after this sector’s elevated performance in December .  Meanwhile, residential building in January held steady, and nonresidential building was able to register growth as the result of gains for a few structure types.

“While down slightly from the previous month, January’s activity is consistent with the sense that construction starts have at least stabilized at a low level,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.  “Relative to the extended decline that took place from 2006 through early 2009, that’s good news.

“The cautionary note,” Murray added, “is that it’s still too early to say that renewed expansion for overall construction activity has taken hold.  On the plus side, the public works sector is seeing strength for transportation-related projects, supported by the federal stimulus funding.  Single family housing reached bottom in early 2009 and has since shown modest improvement.  Nonresidential building has seen a pickup for such publicly-funded structure types as transportation terminals and courthouses.

“However, the commercial categories remain extremely depressed, and given tight bank lending and weak employment are likely to stay that way throughout 2010.”

By region, the 12 months ending January 2010 showed this behavior for total construction – the West, down 28%; the Midwest, down 24%; the South Atlantic, down 23%; the South Central, down 21%, and the Northeast, down 18%.