New construction starts in March advanced 4% to a seasonally adjusted annual rate of $594.1 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. Nonresidential building showed signs of strengthening after a weak February, and modest growth was reported for housing and public works. During the first three months of 2005, total construction on an unadjusted basis came to $131.6 billion, up 2% relative to the same period a year ago.

"The construction industry continues to be supported by a robust volume of homebuilding, and the early months of 2005 have seen an improved amount of public works construction," stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. "In contrast, new starts for nonresidential building have been weaker than expected, but the March upturn may be the initial step for this sector to resume the upward trend that was established last year."

Nonresidential building in March advanced 10% to $138.2 billion (annual rate). For the full year 2004, nonresidential building had risen 4%, yet contracting lost momentum toward the end of last year and during the first two months of 2005. In March, the upward push was provided by a diverse group of structure types. Retail-related projects advanced, with stores up 10% and warehouses up 32%. Hotel construction surged 75%, reflecting both a general rebound for this category plus the inclusion of $80 million related to the hotel portion of the $750 million Trump Tower in Chicago. Health care facilities increased 43%, boosted by the start of large hospital projects located in South Carolina ($144 million), Arizona ($65 million), Florida ($62 million), Tennessee ($60 million), and California ($50 million). Growth was also registered by public buildings (courthouses and detention facilities), up 21%; and churches, up 8%.

On the negative side, school construction retreated 7% in March, slipping back after the gains reported in the previous two months. Moderate declines were also reported for transportation terminals, down 4%; and manufacturing plant construction, down 16%. Office construction in March was down a slight 1%, following a steeper 16% slide in February. Murray stated, "One factor that may be contributing to the slower pace for nonresidential building in recent months is last year's jump in the price of building materials. In some instances this has led to projects being redesigned or deferred, and the adjustment process related to a higher cost structure will take some time to be worked through. Still, the nonresidential market should benefit from an economy growing in the 3% to 4% range, and it's expected that the initial rebound in March will be followed by more improvement in coming months."

During the first three months of 2005, the 2% increase for total construction compared to the same period a year ago was the result of this pattern by sector - nonresidential building, down 12%; residential building, up 7%; and nonbuilding construction, up 9%. By geography, total construction in the January-March period reflected the following performance - the South Central, up 8%; the West, up 4%; the South Atlantic, up 3%; the Northeast, down 1%; and the Midwest, down 5%.