January Construction Starts Slip 2 Percent

March 2018

The value of new construction starts in January receded 2 percent to a seasonally adjusted annual rate of $725.9 billion, easing slightly after December’s 13 percent hike, according to Dodge Data & Analytics. The nonbuilding construction sector, comprised of public works and electric utilities/gas plants, pulled back 18 percent after surging 45 percent in December. At the same time, nonresidential building edged up 1 percent, and residential building climbed 7 percent in January. On an unadjusted basis, total construction starts in January were $52.2 billion, down 7 percent from the same month a year ago. On a 12-month moving total basis, total construction starts in the 12 months ending January 2018 were up 2 percent from the 12 months ending January 2017.
    
The January statistics produced a reading of 154 for the Dodge Index (2000=100), compared to December’s upwardly revised 156. During 2017, the pattern of construction starts frequently showed an up-and-down pattern, which was present towards the end of last year when the Dodge Index fell to 138 in November followed by 156 in December. The 154 reading for the Dodge Index in January, along with December’s 156, shows construction starts climbing back close to last year’s mid-range of activity. For 2017 as a whole, the Dodge Index averaged 159.
    
Nonresidential building in January was $240.8 billion (annual rate), a slight 1 percent rise on top of December’s 10 percent gain. The institutional categories as a group rose 8 percent, led by a 149 percent jump for amusement-related projects that featured the start of the $1.3 billion domed stadium in Las Vegas for the soon-to-relocate NFL Oakland Raiders. The other institutional project types all showed reduced activity to varying degrees relative to December. Educational facilities, the largest nonresidential building category by dollar amount, slipped 1 percent. Healthcare facilities retreated 10 percent in January, although the latest month did include the start of several large hospital projects. The remaining institutional categories showed these January declines: transportation terminals, down 6 percent; religious buildings, down 23 percent; and public buildings, down 25 percent.
    
The manufacturing plant category strengthened in January, climbing 99 percent after a weak December. The commercial categories as a group fell 15 percent in January. New office construction starts retreated 31 percent after a sharp 44 percent jump in December that included two large Facebook data centers. Hotel construction dropped 13 percent after a 4 percent gain in December. The remaining commercial categories witnessed this performance relative to December: stores, down 2 percent; warehouses, unchanged; and commercial garages, up 4 percent.
    
Residential building in January was $331.3 billion (annual rate), up 7 percent. Multifamily housing jumped 39 percent, showing renewed strength after the loss of momentum that took place during the closing months of 2017. During January, there were 11 multifamily projects valued at $100 million or more that reached groundbreaking compared to four such projects in December. In January, the top five metropolitan markets ranked by the dollar amount of multifamily starts were New York City, Miami, Boston, Houston, and Washington, D.C. Metropolitan areas ranked 6 through 10 were San Jose, Calif., Philadelphia, San Francisco, St. Louis, Mo., and Seattle. Single-family housing in January receded 3 percent, settling back after the modest gains reported during the previous five months. In January, single family housing showed this pattern by major region: the West, down 11 percent; the South Central, down 2 percent; the South Atlantic, down 1 percent; the Midwest, unchanged; and the Northeast, up 9 percent.
    
The 7 percent decline for total construction starts on an unadjusted basis for January 2018 relative to January 2017 was the result of a mixed performance by major sector. Nonbuilding construction increased 4 percent, with public works up 6 percent while electric utilities/gas plants dropped 6 percent. Nonresidential building fell 20 percent from a very strong January 2017. Compared to the same month a year ago, the institutional and commercial building segments of nonresidential building were down 23 percent and 21 percent respectively, while manufacturing plant starts advanced 18 percent. Residential building rose 1 percent from the same month a year ago, with single-family housing up 3 percent while multifamily housing slipped 2 percent. By geography, total construction starts for January 2018 relative to January 2017 registered this pattern: the Northeast, down 36 percent; the West, down 10 percent; the South Central, down 9 percent; the South Atlantic, unchanged; and the Midwest, up 42 percent.
    
Useful perspective is made possible by looking at 12-month moving totals, in this case the 12 months ending January 2018 versus the 12 months ending January 2017, which reveal total construction starts advancing 2 percent. By major sector, nonbuilding construction grew 2 percent, with public works up 12 percent and electric utilities/gas plants down 29 percent. Nonresidential building increased 3 percent, with institutional building up 7 percent, commercial building down 5 percent, while manufacturing plant starts climbed 26 percent. Residential building grew 2 percent, with single family housing up 8 percent while multifamily housing fell 12 percent.