New construction starts in October dipped 4 percent to a seasonally adjusted annual rate of $678.9 billion, according to Dodge Data & Analytics. Nonresidential building retreated from its brisk September pace, which was this sector’s strongest volume so far in 2016.
October’s level for nonresidential building was still healthy compared to what’s been reported for much of 2016, remaining 15 percent above its average for this year’s first seven months.
Residential building in October showed moderate growth, with contributions from both single-family and multifamily housing.
For the first ten months of 2016, total construction starts on an unadjusted basis were $572.0 billion, down a slight 1 percent from the same period a year ago. If the volatile manufacturing plant and electric utility/gas plant categories are excluded, total construction starts during this year’s January-October period would be up 3 percent.
October’s data produced a mark of 144 for the Dodge Index, compared to 149 in September and 152 in August. The quarterly averages for the Dodge Index in 2016 show the first quarter at 149, the second quarter at 138, and the third quarter at 142, with the average over the first nine months of the year coming in at 143. October’s pace for total construction starts, while down from August and September, is still up from the third quarter.
“After a sluggish second quarter, the pace of construction starts picked up during the third quarter, and on this basis October is at least maintaining recent improvement,” says Robert A. Murray, chief economist for Dodge. “While there was concern earlier in 2016 that the often hesitant expansion for construction could be stalling, the generally stronger activity in August, September, and now October eases those concerns. Furthermore, the year-to-date comparisons have strengthened as 2016 has proceeded, with total construction starts now down just 1 percent through the first ten months of this year. This compares with the 3-percent decline at the nine-month mark, the 7-percent decline at the eight-month mark, and the 11-percent decline at the seven-month mark.
“Aside from stronger activity during the most recent three months, the year-to-date comparisons are benefiting from last year’s pattern for total construction starts, which showed weaker activity in the second half,” he adds. “The first half of 2015 had been lifted by 13 very large projects valued each at $1 billion or more, while last year’s second half saw only three such projects reach the construction start stage.”
Murray says the overall level of construction starts is at least holding steady in 2016.
“Supportive elements are moderate job growth, generally healthy market fundamentals for commercial real estate, and the funding coming from the state and local bond measures passed in recent years,” he says. “Going forward, the continued expansion for construction should be helped by the November 2016 passage of such bond measures as the $9 billion Proposition 51 in California for school construction, and the emphasis of the incoming Trump Administration on increased spending for infrastructure.”
Nonresidential building in October fell 16 percent to $236.9 billion (annual rate), following gains in August (up 40 percent) and September (up 5 percent). The commercial building categories as a group were down 25 percent after surging 37 percent in September, which reflected an especially strong month for new office projects. On the plus side, hotel construction grew 10 percent in October. The institutional building categories as a group dropped 21 percent in October, following a 9-percent gain in September and a 21-percent hike in August.
Residential building, at $289.6 billion (annual rate), grew 6 percent in October. Single-family housing advanced 6 percent, strengthening after a 3-percent decline in September. Multifamily housing in October climbed 5 percent, strengthening moderately after an 18-percent slide in September.
The 1-percent retreat for total construction starts on an unadjusted basis for the January-October period of 2016 came as the result of a varied pattern by major sector. Nonresidential building year-to-date matched the same period a year ago, with commercial building up 10 percent, institutional building even with last year, and manufacturing building down 36 percent. Residential building year-to-date rose 5 percent, with single family housing up 7 percent and multifamily housing up 1 percent.
By geography, total construction starts during the first ten months of 2016 showed this performance relative to a year ago – the Midwest and West, each up 7 percent; the South Atlantic, up 6 percent; the Northeast, down 3 percent; and the South Central, down 18 percent.