by Shane Henson — February 18, 2013—New construction starts in December 2012 climbed 22 percent to a seasonally adjusted annual rate of $530 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies and a major publisher of construction information in the United States and Canada.
The sharp increase for total construction followed two months of lackluster activity, as several very large projects in December helped to lift the pace of contracting. By major sector, substantial gains in December were reported for nonresidential building and nonbuilding construction, while housing maintained the steady upward trend that has been present for much of the past year.
For 2012 as a whole, total construction starts grew 6% to $463.6 billion, a moderate yet stronger rate of increase than during 2010 (up 2%) and 2011 (up 1%), says McGraw-Hill Construction. Nonresidential building dropped 9% to $149.7 billion. The institutional categories fell a combined 12%. The two largest institutional categories continued their retreat in 2012, with educational buildings down 14% and healthcare facilities down 6%. Other institutional declines for the full year 2012 were: public buildings and transportation terminals, each down 13%; churches, down 18%; and amusement-related projects, down 21%.
The manufacturing plant category for the full year 2012 plunged 33%, retreating after the 80% gain reported in 2011 that reflected groundbreaking for a $3.0 billion coal-to-gasoline plant and two large semiconductor plants. The commercial sector in 2012 grew 5%, not as large as the 15% gain reported for 2011, but still expansion, notes the company. Moderate growth in 2012 was registered by stores, up 10%; hotels, up 14%; and warehouses, up 15%. However, office construction in 2012 slipped back 7% given the comparison to 2011, which included the start of a $1.1 billion government data center in Utah. While the dollar amount for nonresidential building was down 9% for the full year 2012, square footage for nonresidential building was up 4% during this time.
According to McGraw-Hill Construction, the Dodge Momentum Index also rose in December, by 3.2%. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year.
The December gain brought the Momentum Index to 94.9 (2000=100), up from November’s revised 91.9. After showing a hesitant upward trend during the first seven month of 2012, the Momentum Index settled back from August through October, and then stabilized in November. This coincided with the economic and political uncertainty that dampened investment during that time, explained McGraw-Hill Construction. The December rebound for the Momentum Index brings it back close to the 95.4 reached in July, which was the highest reading reported during 2012. The latest month’s upturn may also be the initial sign that the uncertainty that restrained plans for construction is now easing, with the November 2012 elections now final and the fiscal cliff being averted for the time being.
