New Construction Starts in March Drop 13 Percent

New construction starts in March dropped 13 percent from the previous month to a seasonally adjusted annual rate of $633.3 billion, according to Dodge Data & Analytics. The decline followed strong gains in January (up 9 percent) and February (up 17 percent), according to the latest Dodge Data & Analytics report.

By major sector, March showed diminished activity for nonresidential building and nonbuilding construction, while residential building held steady. For the first three months of 2015, total construction starts on an unadjusted basis were up 28 percent from the same period a year ago. If projects in excess of $1 billion are excluded, the result for total construction starts would be a 4-percent gain in March on a seasonally adjusted basis relative to February, and an 11-percent gain for the first three months of 2015 on an unadjusted basis relative to the same period a year ago, according to the report.

The March data produced a reading of 134 for the Dodge Index (2000=100), compared to a revised 155 in February and a 132 in January. For all of 2014 the Dodge Index averaged 124. “The presence of unusually large projects will affect the month-to-month pattern for construction starts, and that’s certainly been true during the early months of 2015,” says Robert A. Murray, chief economist for Dodge Data & Analytics. “The elevated activity in February exceeded the underlying trend for construction starts, and the March pullback returns activity to a more sustainable pace, at the same time showing an industry that’s still in the midst of expansion. While nonresidential building lost some momentum in March, the broad pattern over recent months reveals more growth for commercial building combined with strengthening for several institutional structure types, most notably school construction.

He continues, “Although there’s concern that public works construction will be dampened by the uncertainty caused by the soon-to-expire federal transportation legislation, a healthy amount of highway and bridge work has reached the construction start stage so far in 2015. And, while residential building still awaits renewed upward progress by single family housing, the multifamily side of the housing market continues to strengthen, as low vacancies and rising rents in numerous markets provide the justification for more construction.”