New Construction Starts in December Improve 4 Percent

March 2016

New construction starts in December advanced 4 percent to a seasonally adjusted annual rate of $591.6 billion, according to Dodge Data & Analytics. The December gain follows a 5 percent decline in November, and brings total construction activity back close to the amount that was reported in October. December showed moderate increases for each of the three main construction sectors—nonresidential building, residential building, and nonbuilding construction (public works and electric utilities). For 2015 as a whole, total construction starts climbed 8 percent to $645.5 billion. This continues the pattern of moderate expansion for total construction starts registered during the previous three years—2012, up 12 percent; 2013, up 11 percent; and 2014, up 9 percent.
    
The December statistics produced a reading of 125 for the Dodge Index (2000=100), compared to a revised 120 for November. For all of 2015, the Dodge Index averaged 137.
    
Nonresidential building in December grew 3 percent to $178.5 billion (annual rate). The commercial building group provided most of the December lift to nonresidential building, rising 9 percent from the previous month. Office construction increased 6 percent. Store construction advanced 17 percent in December; the garage and service station category in December jumped 50 percent; warehouse construction in December was unchanged from its November amount; and hotel construction fell 17 percent. The manufacturing plant category in December dropped 16 percent, maintaining the weak performance that emerged during the second half of 2015.
    
The institutional side of the nonresidential building market held steady in December. Amusement-related work soared 87 percent. Transportation terminal work climbed 48 percent in December, and gains were also reported for religious buildings, up 13 percent; and healthcare facilities, up 11 percent. However, educational facilities (the largest nonresidential building category by dollar volume) retreated 19 percent in December following its improved pace during the previous two months. The public buildings category also weakened in December, sliding 11 percent.
    
For 2015 as a whole, nonresidential building fell 8 percent to $204.2 billion. The decline followed a 24 percent increase in 2014, and the 2015 annual amount was still 14 percent above the level reported for 2013. Much of the decline for nonresidential building in 2015 reflected a 39 percent reduction for the manufacturing plant category following its 87 percent surge in 2014, as weaker energy prices in 2015 led to a pullback for large petrochemical plants. If the manufacturing plant category is excluded, nonresidential building in 2015 would be down a modest 2 percent after a 17 percent hike in 2014. The institutional building group in 2015 settled back 4 percent after advancing 13 percent in 2014. Decreased activity was reported for healthcare facilities, down 10 percent, as well as such categories as public buildings, down 3 percent; amusement-related work, down 6 percent; and transportation terminals, down 11 percent. The educational facilities category managed to rise 1 percent in 2015 on top of its 15 percent gain in 2014. The religious buildings category was able to register an 8 percent gain in 2015, although its level of activity remains quite low by recent historical standards.
    
The commercial building group in 2015 held steady with the dollar amount registered in 2014, when activity climbed 22 percent. Hotel construction showed the largest annual gain of the commercial categories in 2015, rising 15 percent. Store construction grew 3 percent in 2015; the garage and service station category slipped 1 percent in 2015; and warehouse construction retreated 3 percent. The office category in 2015 pulled back 5 percent, although it’s important to note that the decline followed a 37 percent increase in 2014.
    
Residential building in December increased 6 percent to $278.1 billion (annual rate). Multifamily housing finished the year by rebounding 22 percent after slipping 5 percent in November. Single-family housing in December was unchanged from its pace in November, essentially staying with the flat pattern that emerged during the second half of 2015.
    
The 2015 amount for residential building was $265.4 billion, up 14 percent and stronger than the 10 percent gain that was reported for 2014. Single-family housing grew 13 percent in dollar terms, showing some improvement after the 3 percent rise in the previous year.
    
The 8 percent gain for total construction starts at the national level in 2015 was the result of greater activity in all five major regions. Leading the way was the Northeast, up 17 percent; followed by the South Central, up 16 percent; the South Atlantic, up 4 percent; the Midwest, up 3 percent; and the West, up 2 percent.