New Construction Starts in February Recede 3 Percent

May 2018

At a seasonally adjusted annual rate of $708.1 billion, new construction starts in February slipped 3 percent from the previous month, according to Dodge Data & Analytics. The reduced activity in February followed a 2 percent decline in January, as the early months of 2018 are showing some loss of momentum after the 12 percent increase reported back in December. The nonbuilding construction sector fell 23 percent in February, resulting in the decline for total construction starts for the second month in a row. In contrast, nonresidential building grew 5 percent in February, continuing the strengthening trend which resumed in December, and residential building improved a slight 1 percent. During the first two months of 2018, total construction starts on an unadjusted basis were $102.4 billion, down 7 percent from the same period a year. On a 12-month moving total basis, total construction starts for the 12 months ending February 2018 were up 2 percent from the 12 months ending February 2017.
    
The February statistics produced a reading of 150 for the Dodge Index (2000=100), compared to 154 for January.
    
Nonresidential building in February was $246.7 billion (annual rate), up 5 percent from January. The commercial categories as a group rose 14 percent, with gains across most of the structure types. Office construction advanced 24 percent after a subdued January. Hotel construction jumped 60 percent in February, while commercial garages climbed 42 percent, and store construction registered a 6 percent. Warehouse construction in February was the one commercial structure type to decline, sliding 36 percent.
    
The institutional categories as a group increased 5 percent in February, boosted by a 52 percent surge for new healthcare facilities. Educational facilities increased 10 percent in February, aided by large high school construction projects in two states, plus groundbreaking for a $145 million science facility at Towson University in Towson, Md. For the smaller institutional categories, gains were reported for religious buildings, up 32 percent; and public buildings, up 9 percent; while declines were reported for amusement-related work, down 37 percent; and transportation terminals, down 38 percent. The manufacturing plant category dropped 48 percent in February after its elevated January amount.
    
Residential building in February was $343.3 billion (annual rate), up 1 percent from January. Multifamily housing increased 7 percent, reflecting the start of 11 projects valued each at $100 million or more. Single-family housing in February slipped 1 percent, easing back for the second month in a row following the modest increases witnessed during the second half of 2017.
    
The 7 percent drop for total construction starts on an unadjusted basis during the first two months of 2018 compared to last year was due to reduced activity for two of the three main sectors. Nonbuilding construction fell 21 percent year-to-date. Nonresidential building decreased 17 percent year-to-date, with commercial building down 12 percent, institutional building down 21 percent, and manufacturing building down 24 percent. For both nonbuilding construction and nonresidential building, the steep year-to-date declines reflected the comparison to elevated activity during the first two months of 2017. Residential building year-to-date increased 10 percent, with single-family housing up 6 percent and multifamily housing up 19 percent.
    
Additional insight is provided by looking at 12-month moving totals, in this case the 12 months ending February 2018 versus the 12 months ending February 2017, which lessens the volatility present in comparisons of just two months. On this basis, total construction starts were up 2 percent. By major sector, nonbuilding construction grew 1 percent, with public works up 9 percent while electric utilities/gas plants fell 24 percent. Nonresidential building also grew 1 percent, with institutional building up 3 percent and commercial building down 5 percent, while manufacturing building improved 16 percent. Residential building advanced 3 percent, with single-family housing up 8 percent while multifamily housing retreated 7 percent.