NEW YORK (September 22, 2016) – New construction starts in August soared 21 percent to a seasonally adjusted annual rate of $711.2 billion, according to Dodge Data & Analytics, following lackluster activity in July. The August rise for total construction starts featured an especially elevated amount for nonresidential building, which was helped by the start of a $3 billion petrochemical plant in Louisiana, the $1.7 billion Wynn Casino in the Boston, Massachusetts, area, and a $508 million terminal upgrade at Seattle-Tacoma International Airport. The nonbuilding construction sector also experienced strong growth, with its public works segment lifted by the start of a $3 billion natural gas pipeline project in the states of Alabama, Georgia and Florida. In addition, residential building contributed with a moderate August gain, reflecting another advance for multifamily housing which included groundbreaking for the $900 million Wanda Vista Tower in Chicago, Illinois. Through the first 8 months of 2016, total construction starts on an unadjusted basis were $439.3 billion, down 7 percent from a year ago. As 2016 is proceeding, the year-to-date decline for total construction is becoming smaller, affected to a lesser extent by the comparison to the massive projects reported during the first half of 2015 and now benefitting from the start of several massive projects in this year’s second half. If projects valued at $1 billion or more are excluded, total construction starts during the first eight months of 2016 would be down a slight 1 percent, or essentially even, with a year ago.
The August data raised the Dodge Index to 150 (2000=100), up from 124 in July. The quarterly averages for the Dodge Index show that construction activity increased 11 percent in this year’s first quarter to 146, followed by a 10 percent decline in the second quarter to 131. The July and August average for the Dodge Index comes to 137, a 4 percent gain relative to the second quarter. “The sharp rise in August makes it likely when September data becomes available that construction starts for the third quarter will be able to register moderate growth, supporting the belief that the construction industry still has room for further expansion despite some recent deceleration” said Robert A. Murray, chief economist for Dodge Data & Analytics.
“The presence or absence of very large projects, of course, has played a considerable role in the month-to-month pattern for construction starts,” Murray said. “While July did not receive much of a boost from very large projects, such a boost was clearly present in the August statistics. Furthermore, the year-to-date readings for the first half of 2016 were skewed by the comparison to the heightened first half of 2015, which included 13 projects valued at $1 billion or more, such as a $9 billion liquefied natural gas terminal in Texas, the $2.5 billion 30 Hudson Yards office-retail tower in New York NY, and the $2.3 billion Interstate 4 highway project in the Orlando FL area. The number of $1 billion-plus projects entered as construction starts decreased substantially in the second half of 2015, when only three such projects were reported, and another low amount took place in this year’s first half when only four such projects were reported. In August, three projects valued each in excess of $1 billion were entered as construction starts, along with four projects in the $500 million to $1 billion range. This ‘grouping’ of very large projects in August can be attributed to timing issues specific to each project, yet it may also be part of a more general trend reflecting a less hesitant stance by firms towards investment than what was present over the past 12 months.”
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