January contracts decrease 2 percent

McGraw-Hill Construction, a division of The McGraw-Hill Cos., New York, has reported construction starts decreased 2 percent in January. For the 12 months ending in January, total construction was down 3 percent compared with the 12 months ending January 2011.

“For construction starts, 2012 started off slowly with activity retreating further into the lower half of its recent range,” says Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “This is consistent with the view that construction still is struggling to achieve upward momentum, even with the recent improvement shown by the U.S. economy. There were some positive signs for construction during 2011, such as a stronger volume for multifamily housing, record high for new electric utility starts and even gains for a few commercial structure types (hotels and warehouses). However, these positives were offset by declines for single-family housing, public works and institutional building.

“For 2012, public works and institutional building will continue to be affected by diminished federal funding, as well as tight state and local budgets,” he continues. “Single-family housing may draw some benefit from the recent federal-state agreement with major banks to rework troubled mortgages, but homebuyer demand still will be restrained by more stringent bank lending standards, which limits any construction upturn. Although multifamily housing appears on the upswing and commercial building seems to be turning the corner, both will require more available bank financing. There were some signs this was taking place during the first half of 2011, before concerns about the debt crisis in Europe during the second half of 2011 caused banks to adopt a more wait-and-see approach.”

Nonresidential building construction basically fell 1 percent in January. In the commercial category, office construction climbed 20 percent; store construction rose 12 percent; warehouse construction fell 11 percent; hotel construction slipped 16 percent; and manufacturing plant construction plunged 39 percent. In the institutional category, health care facility construction surged 105 percent; educational buildings dropped 3 percent; churches decreased 6 percent; amusement-related construction declined 6 percent; public buildings fell 23 percent; and transportation terminals plunged 36 percent.

Residential building construction fell 8 percent in January. Single-family housing decreased 1 percent, and multifamily construction fell 26 percent.

Nonbuilding construction increased 3 percent in January.

During the 12 months ending in January, nonresidential building decreased 16 percent compared with the 12 months ending January 2011. Residential building was up 17 percent, and nonbuilding construction decreased 30 percent. By geographic region, the Midwest rose 16 percent; South Atlantic grew 1 percent; West fell 11 percent; Northeast dropped 28 percent; and South Central plunged 32 percent.