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New Construction Starts in August Recede 2%

Sept. 25, 2017
Nonresidential building advances, but public works and power plants pull back according to Dodge Data & Analytics.

At a seasonally adjusted annual rate of $711.6 billion, new construction starts in August slipped 2% from July, according to Dodge Data & Analytics.  The decline followed July’s 6% increase, yet still kept total construction activity 5% above the relatively subdued pace reported during the second quarter.  The nonbuilding construction sector in August dropped 24% after soaring 26% in July, reflecting decreased activity for public works and power plants, even with the August start of a $1.3 billion natural gas-fired power plant in California.

Residential building in August eased back 1%, due to weaker activity for multifamily housing.  Nonresidential building was the growth sector in August, climbing 14% with the start of two massive projects in New York NY – the $1.6 billion Moynihan Station project and the $1.2 billion Javits Convention Center expansion.  For the first eight months of 2017, total construction starts on an unadjusted basis were $481.7 billion, down 1% from the same period a year ago.  The year-to-date performance for total construction was restrained by a 39% drop for the electric utility/gas plant category.  If the electric utility/gas plant category is excluded, total construction starts in this year’s first eight months would be up 2% from the same period in 2016.

The August data produced a reading of 151 for the Dodge Index (2000=100), compared to the 154 reported in July.  The Dodge Index began 2017 on a heathy note, averaging 160 in the first quarter, but then fell 11% to 143 in the second quarter.  The readings for the Dodge Index in July and August suggest that total construction starts are on track for a partial rebound in the third quarter, although September will reflect some negative impact from Hurricanes Harvey and Irma.  “What stands out about the August statistics is the strength shown by the institutional side of nonresidential building, which is consistent with a broader trend that’s taken hold during 2017,” Robert Murray, chief economist for Dodge Data & Analytics, said in a press release.  “The institutional building segment (which includes such project types as transportation terminals, convention centers, and educational facilities), is providing much of the lift this year to nonresidential building, while the commercial building segment has decelerated after a 20% surge in 2016.  It’s believed that total construction starts for the U.S. should be able to register growth for 2017 as a whole, helped by this year’s strength for institutional building, notwithstanding the near term disruption to construction activity caused by Hurricane Harvey in the Houston TX area and Hurricane Irma in Florida.”