May Construction Falls 16 Percent After Two-Month Increase

June 22, 2012

New construction starts decreased 16 percent in May from April at a seasonally adjusted annual rate of $444.9 billion, according to the latest report from McGraw-Hill Construction. The decline followed increases for total construction in March (up 23 percent) and April (up 11 percent), which reflected increased activity from two massive nuclear power projects.

Last month, non-building construction activity decreased, nonresidential building showed improvement for the second month in a row, and residential building maintained a gradual increase. During the first five months of 2012, total construction starts on an unadjusted basis came in at $180.3 billion, up 6 percent from the same period last year.

"Excluding the lift coming from this year's nuclear power projects, the pattern for construction starts shows a loss of momentum through March, followed by strengthening activity in April and May," says Robert Murray, vice president of economic affairs . "The overall level of activity so far this year, without the nuclear power projects, is actually running slightly behind 2011, but at least the recent trend has been upward after a particularly weak start to 2012."

Murray says commercial building activity is showing slight improvement from significant decreases in 2010, "but its upturn remains tenuous."

"On the down side, the institutional structure types and public works construction still face diminished funding from the federal, state, and local levels of government," he says.

Non-building construction in May dropped 47 percent to $132.1 billion (annual rate). A large share of the non-building downturn was the result of a 71 percent plunge for the electric utility category, following its exceptionally strong volume in April which reflected the start of work at the summer nuclear facility in South Carolina. If the summer project is excluded from the April statistics, then electric utility construction in May would be up 11 percent, while non-building construction would be down a more moderate 9 percent, according to the report.

Nonresidential building, at an annual rate of $153.9 billion, increased to 12 percent in May. The institutional side of the nonresidential market showed moderate improvement for the second month in a row, after a weak start to 2012, although its rate in May was still 13 percent below its average monthly pace during 2011.

Subscribe to USGlass magazine.
Subscribe to receive the free e-newsletter.