February Construction Starts Descend 3 Percent

May 2019

At a seasonally adjusted annual rate of $697.4 billion, new construction starts in February dropped 3 percent from the previous month, according to Dodge Data & Analytics. The February decline returned construction starts to the downward path that emerged during the closing months of 2018. Two of the three main construction sectors registered weaker activity in February: nonbuilding construction fell 8 percent, due to a pullback by its public works segment, while residential building slipped 3 percent. Meanwhile, nonresidential building in February was able to hold steady with its January pace. During the first two months of 2019, total construction starts on an unadjusted basis were $99.3 billion, down 12 percent from the same period a year ago. On a 12-month moving total basis, total construction starts for the 12 months ending February 2019 were able to remain essentially even with the corresponding amount for the 12 months ending February 2018.
    
The February statistics produced a reading of 148 for the Dodge Index (2000=100), compared to 153 for January. The 150 average for the Dodge Index during the first two months of 2019 was the same as the 150 reading in December, which was at the low end of last year’s range of activity.
    
Residential building in February was $299.3 billion (annual rate), down 3 percent as both sides of the housing market showed decreased activity. Multifamily housing fell 7 percent, retreating after its 17 percent rebound in January. The top five metropolitan areas ranked by the dollar amount of multifamily starts in February were New York City, Washington, D.C.; Dallas–Fort Worth, Miami and San Francisco. During the first two months of 2019, the New York, N.Y., metropolitan area comprised 18 percent of the multifamily dollar amount for the United States, up from the 16 percent share for 2018, although not as high as the 24 percent share that was reported for 2015. Single-family housing receded 2 percent from January, continuing the modest slippage that emerged during last year’s fourth quarter.
    
Nonresidential building in February was $244.5 billion (annual rate), basically the same as January’s volume. The commercial building categories as a group rose 2 percent, which followed a 4 percent gain in January. Warehouse construction surged 33 percent, store construction improved 11 percent, and the commercial garage category grew 3 percent. Office construction was the one commercial project type to report a February decline, falling 21 percent after its 18 percent hike in January.
    
The institutional side of nonresidential building was unchanged in February after the 2 percent decline reported in January. The healthcare facilities category had a strong February, increasing 26 percent. Educational facilities in February advanced 6 percent. On the negative side, the public buildings category plunged 45 percent after its 59 percent jump in January that included the $525 million Utah State Prison relocation in Salt Lake City. Decreased construction starts were also reported in February for transportation terminal projects, down 35 percent; church construction, down 23 percent; and amusement-related work, down 7 percent. The manufacturing plant category dropped 14 percent in February after a 13 percent January gain.
    
The 12 percent shortfall for total construction starts on an unadjusted basis during the first two months of 2019 compared to last year was the result of lower activity for each of the three main sectors. Residential building fell 15 percent year-to-date, with single-family housing down 13 percent and multifamily housing down 17 percent. Nonresidential building dropped 13 percent year-to-date, with commercial building down 5 percent, institutional building down 18 percent, and manufacturing building down 29 percent.
    
Additional insight is provided by looking at 12-month moving totals, in this case the 12 months ending February 2019 versus the 12 months ending February 2018, which offers less volatility than is present with year-to-date comparisons of just two months. On this basis, total construction starts for the most recent 12 months essentially matched the amount of the previous period. By major sector, residential building grew 2 percent, with 2 percent gains for both single-family and multifamily housing. Nonresidential building was unchanged from the previous period, with manufacturing building up 21 percent, commercial building up 2 percent, and institutional building down 5 percent.