New Construction Starts Drop 6% In May, Residential Remains Weak
Seasonally adjusted new construction starts in May dropped 6% from April’s level, McGraw-Hill Construction (MHC) reported on Thursday, according to Data DiGest's report. The report said, “Nonresidential building pulled back after its improved level in March and April, while residential building stayed weak. The nonbuilding construction sector showed moderate growth in May, as a strong gain for electric utilities offset a loss of momentum for public works. During the first five months of 2011, total construction starts on an unadjusted basis [was] down 9% from the same period a year ago….Nonresidential building in the January-May period of 2011 fell 8%, due to a 21% slide for the institutional categories. At the same time, commercial building grew 9% year-to-date while manufacturing building climbed 156%. Residential building in the January-May period of 2011 dropped 13%, with the comparison to the early months of 2010 when single-family housing was still being lifted by the homebuyer tax credits. Because single-family housing lost momentum at mid-2010, it’s expected that the 2011 year-to-date performance for single-family housing will become less negative as this year proceeds. Nonbuilding construction in the January-May period of 2011 slipped 7%, the result of a 25% reduction for public works combined with a 105% increase for electric utilities.”
Even with stronger apartment construction and buildings occasionally being built, businesses are still too afraid to take on the debt required for new project construction. Especially since the public sector has trimmed down their spending.
The report expects power to be a continuing force in the construction market while residential will continue to decline. “Total construction in 2011 will climb 2% after declining 9% in 2010,” consulting firm FMI stated in its second-quarter Construction Outlook (www.fminet.com) on June 10. “The nonresidential sector will decline just 2% in 2011 after a 19% decline in 2010."