Yellow light.

New construction starts in October 2006 fell 4 percent compared to the month before, according to McGraw-Hill Construction, Lexington, Mass. In the first 10 months of 2006, overall construction spending was flat compared to 2005, although there were ups and downs among the three sectors.

The pace of construction starts has slowed markedly in recent months, according to a McGraw-Hill economist. "The primary reason for this year's slowing pace of construction starts has been the sharp pullback by single-family housing," says Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. "The slide for single-family housing grew pronounced in late spring, and it has been followed by a further loss of momentum through October."

Adds Murray, "Meanwhile, nonresidential building and public works were holding up well, partially offsetting the downturn for single-family housing. However, in October nonresidential building and public works were not able to provide the same support as before, and the result was the weakest pace for construction starts so far in 2006. It's expected that nonresidential building and public works will at least stabilize in the closing months of 2006, which will help cushion the retreat still underway for total construction activity."

The non-residential sector receded in October by 4 percent, with reduced contracting reported for the two largest institutional structure types: educational buildings, down 12 percent; and health care facilities, down 36 percent.

Large manufacturing projects that broke ground in October included a $320 million cement plant in West Virginia, a $273 million automotive plant in Indiana, a $145 million ethanol plant in North Dakota, and a $140 million ethanol plant in South Dakota.

Office construction grew 15 percent, as large projects reached groundbreaking in Boston, San Francisco and Harrisburg, Pa.

The infrastructure sector slipped by 3 percent in October, with reduced contracting reported for bridges (down 7 percent); sewer systems (down 14 percent); and miscellaneous public works projects (down 14 percent).

Highway construction in October held steady with the elevated amount achieved in September, showing the benefits of the enhanced funding coming from the current multiyear federal transportation bill, according to McGraw Hill.

In the residential sector, new contract spending was down 4 percent in October compared to the month before. On a year-to-date basis, single-family housing during the January-October period of 2006 dropped 11 percent in dollar volume. Only the South Central region posted a gain (6 percent), while activity in the other geographic regions dropped from 9 to 19 percent.

By geography, total construction across all sectors during the first ten months of 2006 was mixed: the South Central, up 13 percent; the Northeast, up 2 percent; the Midwest and West, each down 2 percent; and the South Atlantic, down 4 percent.

U.S. CONSTRUCTION CONTRACT VALUES

                          Jan-Oct 2006   Jan-Oct 2005   % Change

Residential                  $295.0 *      $325.8 *        -9%
Non-Residential Const.       $169.3 *      $151.0 *       +12%
Infrastructure               $103.1 *       $87.8 *       +17%
Total                        $567.4 *      $564.6 *        -0%

Source: McGraw-Hill Construction

Note: Table made by bar graph.