New construction starts in March increased 11 percent from the previous month to a seasonally adjusted annual rate of $785.2 billion, according to Dodge Data & Analytics. The substantial gain followed modest declines in January (down 2 percent) and February (down 3 percent), and brings the pace of total construction starts to the highest level over the past six months.

The nonbuilding construction sector, comprised of public works and electric utilities/gas plants, soared 73 percent in March, boosted by the start of several very large projects. At the same time, both nonresidential building and residential building eased back slightly in March, with respective declines of 1 percent and 2 percent. During the first three months of 2018, total construction starts on an unadjusted basis were $167.3 billion, down 7 percent from last year (which included exceptionally strong amounts for airport terminals and natural gas pipelines). On a 12-month moving total basis, total construction starts for the 12 months ending March 2018 were up 1 percent from the twelve months ending March 2017.

The March data produced a reading of 166 for the Dodge Index (2000=100), up from 150 for February. During the first quarter of 2018 the Dodge Index averaged 157, up 2 percent from the 154 average for last year’s fourth quarter, while slightly below the 161 average for the full year 2017.

“The construction start statistics can show wide swings month-to-month, and March certainly qualifies as one of the stronger months due to the inclusion of several very large projects,” says Robert A. Murray, chief economist for Dodge Data & Analytics. “Looking at the data on a quarterly basis can reduce the volatility present in the monthly statistics, and this year’s first quarter shows a continuation of the up-and-down pattern that’s been present over the past year – first quarter 2017 up 10 percent, second quarter 2017 down 6 percent, third quarter 2017 up 8 percent, fourth quarter 2017 down 9 percent and now first quarter 2018 up 2 percent. This up-and-down pattern typically occurs when construction is at a mature stage of expansion, characterized by a slower rate of growth. A decelerating expansion does not necessarily mean that decline will closely follow, and there are several factors during 2018 that will help construction to stay close to recent levels. In March, Congress reached agreement on fiscal 2018 federal appropriations, which provide additional funding for several public works programs, especially those that are transportation-related. Greater funding continues to be present from construction bond measures passed by state and local governments in recent years. The overall economy continues to proceed at a healthy clip, which supports healthy market fundamentals for commercial building. And, while interest rates are rising, the increases so far have been moderate, as shown by the ten-year Treasury bill stabilizing at 2.8 percent to 2.9 percent during March and the first half of April.”

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