January Construction Starts Jump 12 Percent

April 2017

The value of new construction starts in January climbed 12 percent to a seasonally adjusted annual rate of $690.2 billion, according to Dodge Data & Analytics. After losing momentum during last year’s fourth quarter, nonresidential building strengthened in January, nonbuilding construction bounced back from a subdued December, and residential building edged upward in January as the result of a slight gain for single-family housing. On an unadjusted basis, total construction starts were reported at $48.5 billion, down 3 percent from the same month a year ago which included especially strong amounts for the often volatile manufacturing plant and electric utility/gas plant categories. If manufacturing plants and electric utilities/gas plants are excluded, total construction starts in January would be up 10 percent from last year’s corresponding volume.
    
The January statistics raised the Dodge Index to 146 (2000=100), compared to 130 in December. The Dodge Index reached its 2016 peak in August at 156, and held close to that level in September at 153. The next three months showed the Dodge Index retreating 5 percent to 6 percent each month, culminating in December’s 130. For the full year 2016, the Dodge Index averaged 144.
    
Nonresidential building in January climbed 16 percent to $261.5 billion (annual rate). The inclusion of the $3.4 billion Central Terminal Building project at LaGuardia Airport in New York, N.Y., as a January start provided much of the upward push, supporting a 37 percent gain for the institutional categories as a group and a 768 percent hike for the transportation terminal category. If the Central Terminal Building project is excluded, nonresidential building in January would have receded 2 percent, the institutional categories as a group would be down 1 percent, but the transportation terminal category would still have registered a 138 percent increase given the support coming from other large airport terminal projects. Also advancing in January were healthcare facilities, rising 6 percent, and the public buildings category, which rose 1 percent.
    
On the negative side for the institutional sector, January declines were reported for educational facilities, down 18 percent; amusement-related work, down 36 percent; and religious buildings, down 44 percent.
    
The commercial side of the nonresidential building market grew 12 percent in January. Office construction starts climbed 26 percent, warehouse construction increased 21 percent, and hotel construction rose 5 percent.
    
Declines were reported for store construction, down 1 percent; and commercial garages, down 7 percent. The manufacturing plant category in January plunged 69 percent relative to December.
    
Residential building in January increased 1 percent to $307.6 billion (annual rate), basically maintaining the improved level achieved in December with an 8 percent gain. Single-family housing grew 1 percent due to this pattern by major region: the Midwest, up 13 percent; the Northeast, up 7 percent; the South Atlantic and South Central, each up 2 percent; and the West, down 10 percent. Multifamily housing in January held steady with its December amount.
    
The 3 percent decline for total construction starts on an unadjusted basis for January 2017 relative to January 2016 was the result of a varied performance by major sector. Nonresidential building advanced 27 percent, with institutional building up 74 percent, commercial building, up 14 percent, and manufacturing building down 72 percent. Residential building rose 1 percent, with single-family housing up 7 percent and multifamily housing down 10 percent. By geography, total construction starts for January 2017 relative to January 2016 revealed this pattern: the Northeast, up 22 percent; the West, up 21 percent; the South Atlantic, down 8 percent; the Midwest, down 14 percent; and the South Central, down 24 percent.
    
Useful perspective is made possible by looking at 12-month moving totals, in this case the 12 months ending January 2017 versus the 12 months ending January 2016, which lessens the volatility present in one-month comparisons. For the 12 months ending January 2017, total construction starts were up 1 percent. By major sector, nonresidential building grew 5 percent, with commercial building up 12 percent, institutional building up 10 percent, and manufacturing building down 36 percent. Residential building also grew 5 percent, with single-family housing up 8 percent and multifamily housing down 1 percent. Nonbuilding construction dropped 12 percent, with public works down 6 percent and electric utilities/gas plants down 26 percent.