At a seasonally adjusted annual rate of $513.4 billion, 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 non-residential building and housing, while the non-building construction sector eased back slightly.
The total construction decline followed two months of strengthening activity, although May’s level was still above the lackluster volume registered at the outset of 2014. For the first five months of 2014, total construction starts on an unadjusted basis were $201.5 billion, down 1 percent from the same period a 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,” McGraw Hill Construction chief economist Robert A. Murray said in a statement. “The downturn for non-residential building in May was the result of a sharp pullback by the often-volatile manufacturing plant category after its huge gain in April. 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.
“Of more concern for residential building is single family housing, which has yet to move beyond its recent plateau and resume growth. Non-building 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.”
Single-family housing was unchanged from its pace in April and has now shown declining or flat activity in six out of the past seven months. By region, May showed greater single-family construction in the Midwest, the South Atlantic and the West, but declines in the South Central and Northeast.
“It’s become apparent that the recent loss of momentum for single family housing is the result of more than just tough winter weather conditions,” Murray added. “While mortgage rates remain quite low, with the 30-year fixed mortgage rate settling back to 4.1 percent at the end of May, tight mortgage lending standards are restraining the ability of potential first-time homebuyers to purchase a home.”