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Economic Watch: New Construction Down Slightly

March 21, 2014

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New construction starts in February fell slightly, according to new figures released by McGraw Hill Construction.

After the strong finish to last year, the construction start statistics have shown lackluster activity during the first two months of 2014, totaling an annual rate $486.7 billion last month.

For the first two months of 2014, total construction starts on an unadjusted basis were reported at $66.7 billion, down 3% from the same period a year ago.

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The decline during the first two months of the year was the result of a varied performance by major sector, nonresidential building, down 12%; residential building, up 5%; and nonbuilding construction, down 2%. 

By geography, total construction for the January-February period of 2014 revealed this behavior compared to last year with the South Atlantic, down 8%; the South Central, down 7%; the Midwest, down 4%; the West, unchanged; and the Northeast, up 8%.

February's data kept the Dodge Index at 103, remaining below the full year 2013 average for the Index at 111. 

"While construction activity has generally trended upward over the past two years, the monthly pattern has frequently been hesitant, and early 2014 has turned out to be one of those hesitant periods," said Robert A. Murray, chief economist for McGraw Hill Construction. "To some extent, the harsh winter weather has played a role in dampening construction activity, particularly as it relates to single family housing. At the same time, multifamily housing in early 2014 has been able to strengthen further. 

He said for nonresidential building, the upturn so far has been much more gradual and subject to setback, such as what took place in this year's first two months. Still, the commercial building sector is seeing rising occupancies and rents, and the improved fiscal health of states and more financing from bond measures should help the institutional building sector stabilize, which would enable nonresidential building to soon regain upward momentum. 

“For nonbuilding construction, the prospects for renewed growth in 2014 are more limited, given the comparison to 2013 which included the start of several massive public works projects, in combination with the continued retrenchment for new electric utility starts underway after the record high reached back in 2012,” said Murray.

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