New Construction Starts Decrease in August

New construction starts dropped 6 percent over the month in August to a seasonally adjusted annual rate of $807.1 billion, according to Dodge Data & Analytics. August’s decline breaks a string of three consecutive month-to-month gains. By major sector, nonbuilding construction fell 15 percent in August, reversing the large increases made in the previous month when several notable projects started. The declines in residential and nonresidential building were milder – falling 1 percent and 3 percent respectively in August.

The August statistics lowered the Dodge Index to 171 (2000=100) compared to 182 in July, marking the lowest reading for the index since May.  Despite the month’s decline, the index remains above its 2019 average of 167.

Year-to-date through eight months, total construction starts were 5 percent lower than the same period a year ago due to declines in residential and nonresidential buildings. Nonbuilding construction activity was 3 percent higher through the first eight months of the year due to gains in electric utilities/gas plants.

“The August decline was expected after July’s robust level of starts,” states Richard Branch, chief economist for Dodge Data & Analytics. “Furthermore, the year-to-date activity continued to suggest that this year’s levels are easing back from what was seen in 2018 – essentially mirroring the slowdown in overall economic growth.”

Nonbuilding construction starts reached $217.4 billion (at a seasonally adjusted annual rate) in August, a 15 percent decline from the previous month. Environmental public works (drinking water, sewers, hazardous waste, and other water resource projects) fell 43 percent from July to August, while miscellaneous nonbuilding fell 32 percent. Both types of construction had shown strength in July as work on several large projects got underway. Offsetting these declines was a 10 percent increase in street and bridge projects. The electric utility/gas plant category also gained 9 percent over the month.

The largest nonbuilding construction project to start work in August was the $2 billion Permian Highway Pipeline Project in Texas. Also breaking ground during the month was the $840 million Lynwood Link Extension rail line in Washington and the $625 million Palen Solar Farm in Desert Center, Calif.

Through the first eight months of 2019, nonbuilding construction was 3 percent higher than 2018. However, environmental public works and electric utility/gas plants were the only categories within nonbuilding construction registering a positive year-to-date gain.

Nonresidential building starts dropped 3 percent from July to August, to $283.9 billion (at a seasonally adjusted annual rate). August’s decline was the direct result of a 66 percent drop in manufacturing starts, which had soared in July when the $1 billion Foxconn manufacturing complex broke ground in Mount Pleasant, Wis. Commercial construction starts rose 7 percent in August to $135.2 billion (annual), the result of increases in offices and warehouses. Institutional starts rose 2 percent in August to $138.2 billion (annual) due to increases in health and education facilities.

Several notable nonresidential projects got underway in August, including the $450 million Joan Paul Rubschlager University Cancer Care Center in Chicago, and two Facebook data centers a $400 million facility in Altoona, Iowa, and a $350 million building in New Albany, Ohio.

Through the first eight months of 2019, nonresidential building starts totaled $188.2 billion, a decline of 7 percent over the same time frame of 2018.Commercial starts were 3 percent higher year-to-date, fueled by gains in offices, warehouses, and parking structures. Starts for stores and hotels were lower through the first eight months of this year. Institutional construction was 5 percent lower year-to-date at $92 billion with declines evident across all institutional categories. Manufacturing construction starts were 46 percent lower year-to-date.

Residential building fell 1 percent during the month to $305.8 billion. Single family construction was 3 percent lower, overwhelming a 3 percent gain in multifamily starts.

The month-to-month growth in multifamily housing was aided by the start of a $600 million apartment complex on West 29th Street in New York, N.Y. Also breaking ground during the month was the $515 million Brookfield residential tower in Los Angeles, and the $223 million Sendero Verde mixed-use project in New York.

On a year-to-date basis, total residential construction was 8 percent lower than during the first eight months of 2018 at $211.3 billion. Single family construction was 6 percent down, while multifamily declined 13 percent through eight months.

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