July Construction Starts Slip 2 Percent

October 2016

At a seasonally adjusted annual rate of $586.3 billion, new construction starts in July fell 2 percent from the previous month, according to Dodge Data & Analytics. A steep drop by electric utilities pulled down the nonbuilding construction sector, which in turn contributed to the slight decline for total construction starts. On the plus side, moderate improvement was reported for nonresidential building, helped by greater activity for its commercial building and manufacturing plant segments, while residential building benefitted from a stronger pace by multifamily housing.
    
During the first seven months of 2016, total construction starts on an unadjusted basis were $372.2 billion, down 11 percent from the same period a year ago. The January–July period of 2015 had featured 13 very large projects valued at $1.0 billion or more. In contrast, the January–July period of 2016 included only four projects valued at $1.0 billion or more. Excluding these exceptionally large projects from the comparison leads to a smaller 4 percent decline for total construction starts year-to-date.
    
The July data lowered the Dodge Index to 124 (2000=100), down from 126 in June. After the improved pace reported during the first three months of 2016, the construction start statistics showed an up-and-down pattern during the April–June period, and June’s 7 percent slide has now been followed by the 2 percent drop in July.
    
Nonresidential building, at $187.9 billion (annual rate), grew 4 percent in July following its 7 percent gain in June. The commercial building group advanced 3 percent, with much of the lift coming from a 20 percent jump for office construction. Store construction in July improved 3 percent, but new warehouse starts slipped 6 percent and a 14 percent drop was reported for hotels. The manufacturing building category increased 89 percent after a weak June.
    
The institutional side of the nonresidential building market eased back 1 percent in July. Reduced activity was reported for educational facilities, down 5 percent, and healthcare facilities, down 4 percent. The smaller institutional categories witnessed gains in July, with public buildings up 5 percent, churches up 8 percent, amusement and recreational facilities up 11 percent and transportation terminals up 11 percent.
    
Residential building in July increased 3 percent to $276.7 billion (annual rate), rebounding after the 3 percent decline reported in June. Multifamily housing provided the upward push, rising 9 percent.
    
During the first seven months of 2016, the top five metropolitan areas ranked by the dollar amount of new multifamily starts were New York City, Miami, Chicago, Los Angeles and Boston. The New York City share of the national dollar amount of multifamily starts was 22 percent so far in 2016, down slightly from the 26 percent share for the full year 2015. Single-family housing in July increased 1 percent, basically extending the plateau present during the first half of 2016. The regional pattern for single-family housing in July showed increases in three regions: the Northeast, up 8 percent; the West, up 6 percent; and the South Atlantic, up 2 percent. Declines were reported in the Midwest, down 2 percent; and the South Central, down 5 percent.
    
The 11 percent decline for total construction starts on an unadjusted basis during the January–July period of 2016 was due to diminished activity for both nonbuilding construction and nonresidential building from their heightened levels of a year ago. Nonbuilding construction dropped 21 percent year-to-date while nonresidential building dropped 18 percent year-to-date, with commercial building down 7 percent, institutional building down 12 percent, and manufacturing building down 66 percent. Residential building was the one major sector to show a year-to-date increase, rising 2 percent with single-family housing up 7 percent while multifamily housing retreated 9 percent. By geography, total construction starts during the first seven months of 2016 revealed this pattern relative to a year ago: the South Central, down 31 percent; the Northeast, down 16 percent; the West, down 2 percent; the South Atlantic, down 1 percent; and the Midwest, up 3 percent.