Construction Shows Caution Signs

New construction starts in October 2006 fell 4 percent compared to the month before, according to McGraw-Hill Construction, Lexington, Mass.

In the first ten months of 2006, overall construction spending was flat compared to 2005, although there were ups and downs among the three sectors.

The pace of construction starts has slowed markedly in recent months, according to a McGraw-Hill economist. “The primary reason for this year’s slowing pace of construction starts has been the sharp pullback by single-family housing,” says Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “The slide for single-family housing grew pronounced in late spring, and it has been followed by a further loss of momentum through October.”

Adds Murray, “Meanwhile, nonresidential building and public works were holding up well, partially offsetting the downturn for single-family housing. However, in October nonresidential building and public works were not able to provide the same support as before, and the result was the weakest pace for construction starts so far in 2006. It’s expected that nonresidential building and public works will at least stabilize in the closing months of 2006, which will help cushion the retreat still underway for total construction activity.”

The non-residential sector receded in October by 4 percent, with reduced contracting reported for the two largest institutional structure types: educational buildings, down 12 percent; and health care facilities, down 36% percent.

Large manufacturing projects that reached groundbreaking in October included a $320 million cement plant in West Virginia, a $273 million automotive plant in Indiana, a $145 million ethanol plant in North Dakota, and a $140 million ethanol plant in South Dakota.

Office construction grew 15 percent, as large projects reached groundbreaking in Boston, San Francisco and Harrisburg Pa.

The infrastructure sectorslipped by 3 percent in October, with reduced contracting reported for bridges (down 7 percent), sewer systems (down 14 percent); and miscellaneous public works projects (down 14 percent).