At a seasonally adjusted annual rate of $535.6 billion, new construction starts in February increased 4% relative to the previous month, it was reported byMcGraw-Hill Construction, a division of The McGraw-Hill Companies. Gains were registered by nonresidential building and housing, while the nonbuilding construction sector held steady with its January pace. During the first two months of 2004, total construction was 2% higher than the same period a year ago.

"The construction industry appears to be hovering at a level close to last year's pace," stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. "Housing remains very healthy, and the upturn for nonresidential building in February was a welcome development after a sluggish January. Over the course of 2004, it's expected that nonresidential building will see a modest strengthening trend. Admittedly, though, this year's sharp increase in steel prices has made the nonresidential upturn less certain, given the impact that higher costs and materials shortages may have on individual construction projects. At this juncture, it appears that the nonresidential upturn will be dampened but not derailed, assuming steel prices settle back by midyear, but the situation clearly bears watching."

Nonresidential building in February increased 7% to $148.3 billion. Office construction jumped 39% following a weak January, boosted by the start of two U.S. Department of Transportation office buildings in Washington totaling $189 million, plus two office buildings in Atlanta valued respectively at $89 million and $80 million. Murray indicated, "While still at a low volume, office construction is now seeing the occasional monthly gain, which in the case of February included the start of several large government-related office projects." Stores and shopping centers in February increased 21%, reflecting the start of an $88 million project in Logan Township, PA and a $50 million project in Las Vegas. The educational building category also had a strong month, rising 18% with the start of a $100 million university building in Chicago and a $55 million museum renovation in New York City.

Nonresidential structure types that weakened in February included: hotels, down 36% (compared to a robust January buoyed by the addition to a major Las Vegas hotel/casino); manufacturing plants, down 24%; and warehouses, down 11%. The institutional categories, other than educational buildings, also registered generally weaker activity in February. Declines were posted by public buildings (courthouses and detention facilities), down 33%; transportation terminals, down 20%; health care facilities, down 10%; churches, down 8%; and amusement-related projects, down 3%.

On an unadjusted basis, the 2% gain for total construction in 2004's January-February period was due to this pattern by sector, relative to last year - residential building, up 13%; nonresidential building, down 7%; and nonbuilding construction, down 13%. By geography, total construction performed as follows in 2004's first two months - the South Atlantic, up 11%; the South Central, up 1%; the Midwest and West, each unchanged; and the Northeast, down 8%.