August Construction Starts Jump 21 Percent

November 2016

New construction starts in August soared 21 percent to a seasonally adjusted annual rate of $711.2 billion, according to Dodge Data & Analytics, following lackluster activity in July. The August rise for total construction starts featured an especially elevated amount for nonresidential building. The nonbuilding construction sector also experienced strong growth. In addition, residential building contributed with a moderate August gain, reflecting another advance for multifamily housing. Through the first eight months of 2016, total construction starts on an unadjusted basis were $439.3 billion, down 7 percent from a year ago. As 2016 is proceeding, the year-to-date decline for total construction is becoming smaller, affected to a lesser extent by the comparison to the massive projects reported during the first half of 2015 and now benefiting from the start of several massive projects in this year’s second half. If projects valued at $1 billion or more are excluded, total construction starts during the first eight months of 2016 would be down a slight 1 percent, or essentially even, with a year ago.
    
The August data raised the Dodge Index to 150 (2000=100), up from 124 in July. The quarterly averages for the Dodge Index show that construction activity increased 11 percent in this year’s first quarter to 146, followed by a 10 percent decline in the second quarter to 131. The July and August average for the Dodge Index comes to 137, a 4 percent gain relative to the second quarter.
    
Nonresidential building in August surged 42 percent to $267.4 billion (annual rate), rising from the subdued activity reported during the previous four months and reaching the highest amount since April 2015. A substantial boost came from the manufacturing plant category, which climbed 291 percent in August. The commercial categories together advanced 31 percent. The commercial garage category advanced 64 percent. Warehouse construction strengthened 75 percent. Office construction improved 3 percent following its 21 percent increase in July. Store construction was the one commercial project type that did not report an August gain, as it held steady with its July pace.
    
The institutional side of the nonresidential building market increased 24 percent in August. The amusement and recreational category jumped 118 percent. Transportation terminal work climbed 30 percent. Educational facilities, which is the largest institutional category, grew 18 percent in August. Healthcare facilities increased 15 percent, and the religious buildings category managed to grow 16 percent in August from a subdued July, while the public buildings category fell 11 percent.
    
Residential building in August advanced 5 percent to $291.1 billion (annual rate). Multifamily housing strengthened for the second month in a row, rising 25 percent after its 10 percent gain in July.
    
The 7 percent drop for total construction starts on an unadjusted basis during the first eight months of 2016 was the result of declines for both nonbuilding construction and nonresidential building compared to a year ago. Nonbuilding construction fell 17 percent year-to-date. Nonresidential building decreased 10 percent year-to-date, with commercial building down 1 percent, institutional building down 8 percent, and manufacturing building down 45 percent. Residential building continued to be the one major sector reporting a year-to-date gain, increasing 3 percent with single-family housing up 7 percent while multifamily housing receded 4 percent. By major region, total construction starts during the first eight months of 2016 showed this performance compared to a year ago—the Midwest, up 5 percent; the South Atlantic, up 4 percent; the West, unchanged; the Northeast, down 12 percent; and the South Central, down 25 percent.