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New construction starts in December dropped 5 percent to a seasonally adjusted annual rate of $427.4 billion, according to McGraw-Hill Construction, a division of the McGraw-Hill Cos. Despite slight improvement for nonresidential building, the housing sector showed further weakness in December, and decreased activity was also reported for nonbuilding construction.

For the full year 2008, total construction starts were down 15 percent to $542.8 billion, marking the second straight year of reduced contracting after the 7 percent decline reported for 2007. Excluding residential building, new construction starts for 2008 were up a modest 2 percent, a decelerating rate of growth for the non-housing project types following gains of 7 percent in 2007 and 21 percent in 2006.

"The pattern of construction starts revealed a downward trend over the course of 2008, as the extended slide for housing was joined by emerging weakness for commercial building and to a lesser extent public works," says Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. "At the same time, there were still several bright spots in 2008. These included more growth for educational buildings and healthcare facilities, plus large gains for manufacturing plants and electric power plants. For 2009, the depressed economy and troubled financial sector will lead to further declines for housing and commercial building, and a loss of momentum is also anticipated for the institutional and manufacturing structure types. The eroding fiscal position of states and localities poses a constraint for public works, but this could be more than offset by the boost arising from the Obama Administration’s stimulus package, which is expected to be passed in mid-February."

Nonresidential building in December grew 2 percent. For 2008 as a whole, nonresidential building edged up 1 percent to $237.7 billion. Residential building in December dropped 11 percent to $111.4 billion, the result of declines for both single family housing and multifamily housing. Single family housing retreated steadily as 2008 progressed, with reduced activity reported in eleven out of the twelve months. "This suggests," Murray says, "that the slide for single family housing still has further to go before reaching bottom."

Nonbuilding construction in December retreated 10 percent to $107.2 billion. For the full year 2008, nonbuilding construction increased 4 percent to $143.1 billion. The public works sector included a slight 1 percent gain for sewer construction, as well as a 15 percent increase for river/harbor development that was helped by continued reconstruction efforts in New Orleans.