October Construction Advances 5 Percent

The value of new construction starts increased 5 percent in October to a seasonally adjusted annual rate of $585.6 billion, according to McGraw Hill Construction, a division of McGraw Hill Financial.

The gain followed a 13-percent jump for total construction starts in September, and during both September and October much of the upward push came from groundbreaking for several very large projects, according to the report. By sector, nonresidential building surged in October, aided by the start of three massive manufacturing plants, and residential building resumed its upward track after a September pause.

The October data lifted the Dodge Index to 124 (2000=100), compared to 118 in September and the highest reading for the Index so far in 2013. During the first eight months of 2013, the Index had stayed within the fairly narrow range of 99 to 107, but the most recent two months have seen the Index climb substantially, according to the report.

“The levels of activity in September and October reflected the impact of several large and unusual projects, so a slower pace can be expected going forward in the near term,” says Robert A. Murray, chief economist for McGraw Hill Construction. “At the same time, October’s data did include positive signs that the underlying upward trend for construction is likely to continue, even amidst the greater uncertainty caused by the 16-day government shutdown last month. For nonresidential building, more manufacturing-related projects are reaching groundbreaking, the commercial structure types are moving upward albeit unevenly, and the educational building category is providing more evidence that it’s stabilizing after a lengthy decline. Residential building in October showed its resilience with a modest gain after losing momentum in September. And, while public works is vulnerable to federal spending cutbacks, it continues to benefit as major projects that have been in the planning pipeline are now reaching the construction start stage.”

Nonresidential building in October climbed 20 percent to $216.9 billion (annual rate). Manufacturing plant construction soared 147 percent, according to the report.

The commercial categories combined rose 3 percent in October, helped in particular by strong percentage growth for stores, up 29 percent, and warehouses, up 22 percent. Offices and hotels retreated in October, falling 8 percent and 15 percent respectively. On the institutional side, the educational building category grew 4 percent in October, rising for the second month in a row and reaching its strongest volume so far in 2013. The healthcare facilities category in October dropped 20 percent after its sharp upturn in September.

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