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Winter-battered construction activity returns to projected levels

Source: McGraw Hill Construction, New York

New construction starts in March advanced 7 percent to a seasonally adjusted annual rate of $521.4 billion, based on measurements of three major sectors: 1) nonresidential building, which picked up the pace after its lackluster performance at the outset of this year; 2) nonbuilding construction, logging a moderate gain; and, residential building, which settled back as single-family housing remained sluggish.

During the first three months of 2014, total construction starts on an unadjusted basis were reported at $107.4 billion, down 2 percent from the same period a year ago. Highway construction in March increased 26 percent, while bridge work climbed 45 percent. “The slow start for construction activity in early 2014 can be attributed to tough winter weather conditions, in combination with the up-and-down pattern that’s frequently been present during the hesitant upturn witnessed over the past two years,” says McGraw Hill Construction Chief Economist Robert Murray. “This is particularly true for nonresidential building, which bounced back sharply in March after depressed activity in January and February, alleviating some concern that its recovery may be stalling.

“Nonresidential buildingʼs potential for more growth in 2014 is being supported by a rising volume of bank lending directed at commercial real estate development, more energy-related manufacturing projects, and signs that the institutional building sector is finally turning the corner after five years of decline. Nonbuilding construction in 2014 is seeing a less severe pullback for electric utilities compared to last year, although public works is generally proceeding at a slower clip. Residential building so far in 2014 is benefitting from more strength for multifamily housing, yet the loss of momentum for single family housing in the first three months of 2014 stands out relative to the steady gains registered in 2012 and most of 2013.”