Construction slides but no need to worry, economist says

New construction starts in May dropped 5 percent from the previous month according to McGraw Hill Construction, a division of McGraw Hill Financial. The reduced pace for total construction starts reflected a moderate loss of momentum for nonresidential building and housing, the firm reports. The nonbuilding construction sector eased back slightly, as well.

The total construction decline followed two months of strengthening activity, according to McGraw Hill Construction. May’s level was still above the volume registered at the beginning of 2014. Also, for the first five months of this year, total construction starts on an unadjusted basis were down 1 percent from the same period of one year ago.

“After the slow beginning to 2014, construction activity during March and April regained upward momentum, and May’s retreat does not necessarily mean that renewed expansion is stalling,” says Robert Murray, chief economist for McGraw Hill Construction. “The downturn for nonresidential building in May was the result of a sharp pullback by the often-volatile manufacturing plant category after its huge gain in April.

The May stats lowered McGraw Hill Construction’s Dodge Index to 109, compared to a revised 114 for April. During the first two months of 2014, the Dodge Index was reported at 103.

“Residential building has often reflected the monthly up-and-down pattern for multifamily housing, which, despite a setback in May, can still be viewed as trending upward,” Murray says. “Of more concern for residential building is single-family housing, which has yet to move beyond its recent plateau and resume growth. Nonbuilding construction in May was pulled down by further weakness for electric utilities. At the same time, public works construction made a partial rebound in May after retreating during the previous two months.”