May Construction Starts Climb 15 Percent

At a seasonally adjusted annual rate of $783.6 billion, new construction starts in May advanced 15 percent from April, according to Dodge Data & Analytics. The increase follows a 12-percent decline in April, and shows total construction activity reaching the highest level reported over the past eight months.

According to the report, the lift in May came from substantial gains for nonbuilding construction, up 39 percent; and nonresidential building, up 18 percent, as both sectors benefitted from the start of several very large projects. Nonbuilding construction, and specifically its public works segment, was boosted by the start of three large natural gas pipelines with a combined construction start cost of $4.6 billion, plus $1.4 billion related to the start of an environmental cleanup project at the Los Alamos National Laboratory in New Mexico, a $1.4 billion rail transit project in Los Angeles, and a $1.1 billion rail transit project in the Boston area.

Nonresidential building was aided by the start of a $1.0 billion Facebook data center in Nebraska, the $764 million expansion to the Washington State Convention Center in Seattle, and a $740 million airport terminal project at Salt Lake City International Airport. Meanwhile, residential building in May held steady with its April pace. Through the first five months of 2018, total construction starts on an unadjusted basis were $299.9 billion, down 3% from the same period a year ago. On a twelve-month moving total basis, total construction starts for the twelve months ending May 2018 were up 1 percent from the amount reported for the twelve months ending May 2017.

The May statistics raised the Dodge Index to 166 (2000=100), compared to April’s reading of 144 (upwardly revised from the initially reported 143). “During the first five months of 2018, total construction starts have shown an up-and-down pattern, with May coming in strong after a subdued April,” says Robert A. Murray, chief economist for Dodge Data & Analytics. “Much of the volatility in early 2018 has come from the public works sector, affected by the presence of unusually large project starts during a given month such as what took place in May. In addition, the nonresidential building sector showed resilience in May, bouncing back after a lackluster performance in April.”

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