Prosperity in the U.S. construction industry was again “on the house,” as the residential segment continues to exhibit most of the recent growth in the domestic building industry.
On a seasonally adjusted basis, new construction starts in February increased 4 percent relative to the previous month, according to McGraw-Hill Construction, a division of The McGraw-Hill Cos. New York
During the first two months of 2004, total construction contract values have been 2 percent higher than from the same period a year ago.
“The construction industry appears to be hovering at a level close to last year’s pace,” says Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “Housing remains very healthy, and the upturn for non-residential building in February was a welcome development after a sluggish January.”
Murray remarked that higher steel prices could be putting a crimp in the non-residential segments. “Over the course of 2004, it’s expected that nonresidential building will see a modest strengthening trend. Admittedly, though, this year’s sharp increase in steel prices has made the nonresidential upturn less certain, given the impact that higher costs and materials shortages may have on individual construction projects. At this juncture, it appears that the nonresidential upturn will be dampened but not derailed, assuming steel prices settle back by midyear, but the situation clearly bears watching.”
Even with the steel price quandary, in February non-residential activity increased 7 percent over January to $148 billion . Office construction jumped 39 percent following a weak January, boosted by major projects in Washington, D.C., and Atlanta.
Stores and shopping centers in February increased 21 percent, reflecting the start of an $88 million project in Pennsylvania and a $50 million project in Las Vegas. The educational building category also had a strong month, rising 18 percent with the start of a $100 million university building in Chicago and a $55 million museum renovation in New York City.
Nonresidential segments that weakened in February included hotels, institutional categories other than educational, health care, churches and the amusement category.
Single-family housing edged up 2 percent over January, while multi-family housing in February surged 21 percent, posting its second strong gain in a row. Major multi-family construction starts in February included large projects in Florida, Boston and Fort Worth, Texas.
The non-building or infrastructure segment in February remained flat compared to January. Highways and bridges activity was up 16 percent in February, helped by the start of several large bridge projects in such states as Virginia, North Carolina, Pennsylvania, Tennessee and Iowa.
“After an unusually weak January, it was expected that public works construction would rebound in February,” says Murray. “At the same time, the tough fiscal climate for the federal and state governments means that it will be difficult for public works to see growth for 2004 as a whole.”