New Construction Starts in June Drop 7 Percent

September 2016

New construction starts in June decreased 7 percent from the previous month to a seasonally adjusted annual rate of $595.1 billion, according to Dodge Data & Analytics. The nonbuilding construction sector fell sharply after being lifted in May by the start of a $3.8 billion oil pipeline in the upper Midwest and seven large power plant projects totaling $4.3 billion. Residential building in June edged down with reduced activity reported for both single-family and multifamily housing. At the same time, nonresidential building registered moderate growth in June after sliding back in April and May. Through the first six months of 2016, total construction starts on an unadjusted basis were $318.1 billion, down 11 percent from the same period a year ago. The January–June period of 2015 included 13 exceptionally large projects valued each at $1 billion or more. In contrast, the January–June period of 2016 included only four projects valued at $1 billion or more. If these exceptionally large projects are excluded, total construction starts during the first half of 2016 would be down a slight 2 percent from last year.
    
June’s data lowered the Dodge Index to 126 (2000=100), compared to 135 in May. After strengthening in this year’s first quarter, the Dodge Index fluctuated in the second quarter, rebounding in May after April’s decline, followed by another decline in June.
    
Residential building, at $268.6 billion (annual rate) slipped 2 percent in June, with slightly diminished activity for both single-family and multifamily housing relative to May.
    
Single-family housing in June settled back 1 percent, which essentially maintains the plateau that’s been present in the first half of 2016 after the improved activity registered during the closing months of 2015. The first half of 2016 showed this regional pattern for the dollar amount of single-family construction compared to last year: the Midwest, up 14 percent; the Northeast, up 9 percent; the South Atlantic and West, each up 8 percent; and the South Central, up 3 percent.
    
Multifamily housing in June retreated 5 percent after climbing 16 percent in May. There were 10 multifamily projects valued each at $100 million or more that reached groundbreaking in June. Through the first six months of 2016, New York, N.Y., continued to be the leading metropolitan area in terms of the dollar amount of multifamily starts, followed by Los Angeles, Miami, Chicago and Boston. Metropolitan areas ranked six through 10 during this period were Washington, D.C., San Francisco, Dallas–Ft. Worth, Texas, Atlanta and Denver. Of these 10 metropolitan areas, seven showed greater activity compared to a year ago, while three showed declines: New York City, down 27 percent; Washington, D.C., down 18 percent; and Denver, down 2 percent.
    
Nonresidential building in June grew 6 percent to $180.8 billion (annual rate), strengthening after its April and May declines. The commercial categories as a group rose 9 percent in June, with the upward push coming from hotels and office buildings. Hotel construction advanced 36 percent after a weak May, and office construction increased 19 percent. During the first six months of 2016, the top five metropolitan areas in terms of the dollar amount of office starts were New York, N.Y., Washington, D.C., Dallas–Ft. Worth, Texas, San Francisco and Atlanta. Metropolitan areas ranked six through 10 during this period were Boston, Los Angeles, Seattle, Reno, Nev., and Chicago. Stores and warehouses both retreated in June, sliding 4 percent and 17 percent respectively. The manufacturing plant category weakened further in June, falling 29 percent.
    
The institutional side of the nonresidential building market increased 7 percent in June, reflecting a mixed pattern by project type. Healthcare facilities climbed 22 percent, educational facilities edged up 1 percent, and the relatively small transportation terminal category jumped 95 percent from a weak May. Losing momentum in June were public buildings, down 4 percent; churches, down 18 percent; and amusement-related projects, down 23 percent.
    
The 11 percent drop for total construction starts on an unadjusted basis during the January–June period of 2016 reflected reduced activity for both nonbuilding construction and nonresidential building, relative to their elevated pace of a year ago. Residential building continues to be the one major sector that’s advancing year-to-date, rising 4 percent, with an 8 percent gain for single-family housing outweighing a 4 percent decline for multifamily housing. By geography, total construction starts during the first six months of 2016 showed this pattern compared to last year: the South Central, down 32 percent; the Northeast, down 11 percent; the West, down 3 percent; the South Atlantic, down 1 percent; and the Midwest, up 5 percent.