Statistics for the early spring suggest that construction activity overall is just hanging on, pointing to a year that is unlikely to produce either big gains or declines for the industry.

McGraw Hill Construction on May 18 reported that new construction starts in April were running at a seasonally adjusted annual rate of $400.2 billion, basically the same amount as in March.

Multifamily housing was one of the clear winners in April, with its yearly starts pace climbing 43%. While on an upward path, however, the monthly pattern has been up and down, McGraw Hill noted.

Not faring as well, both stores and warehouses posted large April declines, sliding 22% and 30%, respectively, according to McGraw Hill.

Office construction was also down for the month, dropping 55% from March, which received an exceptional boost from a $1.1 billion data center for the National Security Agency in Utah.

Bucking April’s downward bent for commercial building, hotels jumped a rousing 91%, bolstered by large projects in New York City and Bloomington, Minn.

“The pattern of construction starts has been essentially flat within a broad range for about two years now, and the past three months have come in towards the lower end of that range,” said Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.

“There have been a few positive signs in recent months, such as the strengthening trend shown by multifamily housing and the pickup for manufacturing plants,” he said.

“However, single-family housing remains stalled, and the tough fiscal environment continues to dampen the prospects for institutional building and public works, even with the occasional support coming from large projects such as took place during April,” Murray said.

The bottom line, he concluded: “More and more, it’s looking like the best that can be expected this year for the overall level of construction starts is flat activity.”

Clobbered by Price Hikes

In the meantime, weak or weakening demand for new construction projects in both the private and public sectors has been making it more difficult for contractors to cope with stiff price hikes for key building materials, the Associated General Contractors of America (ASC) said on May 20.

“Contractors have been clobbered for several months by double-digit price hikes for diesel fuel, copper and steel products,” said Ken Simonson, AGC’s chief economist.

Simonson noted that the producer price index for all materials increased by 1.4% in April and 7.1% over the past 12 months.

By comparison, the price of finished buildings rose 1.1% or less in April and only 1.7% or less over the past year, depending on the building type.

Simonson said the most extreme price increase was for diesel fuel, which jumped 5.7% in April and 41.6% year-over-year.

Prices for copper and brass mill shapes climbed 2.6% in April and 14.3% year-over-year, while steel mill product prices increased 2.2% and 13%, respectively.

Slipping from their highs in recent weeks, prices for crude oil, iron and steel scrap, and copper futures — items that usually indicate near-term price movements for diesel fuel, construction steel and copper wire and pipe — may have seen the worst of the increases for now, although they remain volatile, Simonson said.

Job Increases on Shaky Ground

The AGC economist cited modest increases in construction employment over the past three months, but indicated that the slow jobs recovery could be undermined by rising building costs as well as by public sector funding cuts.

The upturn in construction jobs has also been uneven and unsteady.

“It is good to see more states adding construction jobs for the year ending in April than at any point since February 2008, Simonson said.

“However, most of the gains were modest at best while the losses were more severe in more states than last month,” he said.

In April, 19 states and Washington, D.C., added jobs over the past year, according to an AGC analysis, but the gains were less than 3% in all but four states.

At the same time, four states experienced double-digit construction job losses: Minnesota, down 14.1% and losing 12,900 jobs; Nevada, down 11.6% or 7,100 jobs; Wisconsin, off 11.3% or 11,000 jobs; and Colorado, dropping 11.2% and losing 13,100 jobs.

Florida lost 20,400 construction jobs for the 12 months ending in April, making it the state with the highest number of job losses during that period, followed by New York, Colorado, Minnesota and Georgia.

Lagging Behind in Infrastructure Spending

While sentiment to reduce the federal deficit is on the rise and demand for public sector spending is dwindling at every level of government, a new report from the Urban Land Institute (ULI) and Ernst & Young found that the U.S. is lagging behind infrastructure spending in other major countries.

Outside of the U.S., “in most of the developed world and in many emerging markets, countries have committed to fulfilling infrastructure agendas as essential for sustaining or enhancing living standards in an increasingly competitive global market,” said their report.

“The U.S. is facing increasing federal, state and municipal budget deficits, and lacks any type of comprehensive national policy or the political will to develop a long-term approach to funding the significant maintenance needs of aging U.S. infrastructure, much less the modernization and greenfield development of critically needed new projects,” said Howard Roth, Ernst & Young’s Global Real Estate Leader.

“We need to refocus our priorities: streamline the procurement process, attract private capital more efficiently, strategically invest in projects with national merit and regain our stature as a global competitor,” he said.

“We need to take a page out of the playbooks of several nations around the world highlighted in our report, or we face the risk of serious deterioration of our country’s economic and social well-being,” Roth said.

With $2 trillion needed just to repair and rebuild deteriorating roads, bridges, water lines, sewage treatment plants and dams, the nation’s infrastructure woes will only get worse, as the politically fractured government erodes support for both existing upgrades and new initiatives, said ULI Executive Vice President Maureen McAvey.

Public spending on transportation and water infrastructure as a share of U.S. gross domestic product peaked at 3.1% in 1963, then declined steadily to 2.4% in 2007, according to Congressional Budget Office data.

For information on commercial building resources available from NAHB, email Lisa Leone, or call her at 800-368-5242 x8455.