NEW YORK (April 21, 2017) – New construction starts in March increased 5 percent to a seasonally adjusted annual rate of $743.7 billion, marking the third straight monthly gain, according to Dodge Data & Analytics. The total construction growth in March was led by the nonbuilding construction sector, and particularly by public works which featured the start of two large pipeline projects – the $4.2 billion Rover natural gas pipeline in Ohio and Michigan, and the $2.5 billion Mariner East 2 propane and natural gas liquids pipeline in Pennsylvania. Residential building in March registered moderate growth, helped by a rebound for multifamily housing after a subdued February. Nonresidential building in March held steady with its February pace, as strong activity for office buildings and airport terminals offset a steep drop for manufacturing plants. Through the first three months of 2017, total construction starts on an unadjusted basis were $160.1 billion, down 3 percent from the same period a year ago (which included heightened activity for manufacturing plants and electric utilities/gas plants). If the often volatile manufacturing plant and electric utility/gas plant categories are excluded, total construction starts during the first three months of 2017 would be up 8 percent relative to last year.
The March data produced a reading of 157 for the Dodge Index (2000=100), compared to 149 in February and 147 in January. After sliding to a weak 129 in December, the Dodge Index over the next three months bounced back 22 percent. On a quarterly basis, the Dodge Index averaged 151 during this year’s January-March period, up 9 percent compared to the 139 average for the fourth quarter of 2016. “The pattern for construction starts in early 2017, with three straight monthly gains, is the reverse of the three straight monthly declines that closed out 2016,” noted Robert A. Murray, chief economist for Dodge Data & Analytics.
“While the construction start statistics will frequently show an up-and-down pattern, whether month-to-month or quarter-to-quarter, the improved activity in this year’s first quarter provides evidence that the construction expansion is still proceeding,” Murray continued. “This year’s first quarter has seen nonresidential building and public works rebound from the loss of momentum each experienced towards the end of 2016, helped respectively by the strong activity so far in 2017 for new airport terminal projects and new pipeline projects. Nonresidential building in 2017 should be able to stay on its upward track, supported by further growth for such institutional project types as school construction. As for public works, it’s also expected to show improvement over the course of 2017, although its prospects are less certain given its connection to legislative developments at the federal level. This includes how Congress will deal with the continuing resolution for fiscal 2017 appropriations scheduled to expire at the end of April, and whether a new federal infrastructure program will get passed this year.”
The commercial side of the nonresidential building market increased 7 percent in March, showing improvement after a 10 percent drop in February. Office construction climbed 41 percent, lifted by the start of five projects valued each in excess of $100 million. These were led by the $525 million East Campus Building 2 at the U.S. Army installation at Fort Meade MD, the $289 million LG corporate headquarters in Englewood Cliffs NJ, and a $228 million office building in Seattle WA. Commercial garages also advanced in March, rising 12 percent. In contrast, March witnessed declines for hotels, down 7 percent; stores and shopping centers, down 8 percent; and warehouses, down 14 percent. The manufacturing plant category in March plunged 65 percent, after being lifted in February by the start of a $985 million refinery modernization in Richmond CA.
The 3 percent decline for total construction starts on an unadjusted basis during the first three months of 2017 relative to last year was due to a varied pattern by major sector. Nonbuilding construction dropped 17 percent year-to-date, with electric utilities/gas plants down 72 percent while public works climbed 20 percent (reflecting the start of several large pipeline projects in early 2017). Residential building slipped a modest 1 percent year-to-date, with multifamily housing down 18 percent while single family housing grew 9 percent. Nonresidential building registered a 7 percent gain year-to-date, with institutional building up 35 percent, commercial building down 9 percent, and manufacturing building down 44 percent. By geography, total construction starts in the first three months of 2017 showed reduced activity relative to last year in two regions – the South Central, down 26 percent; and the Northeast, down 3 percent. Total construction gains year-to-date were reported in the West, up 1 percent; the South Atlantic, up 11 percent; and the Midwest, up 12 percent.
Further perspective comes from looking at twelve-month moving totals, in this case the twelve months ending March 2017 versus the twelve months ending March 2016. On this basis, total construction starts were up 2 percent. By major sector, nonbuilding construction decreased 8 percent, with electric utilities/gas plants down 40 percent while public works increased 6 percent. Residential building rose 3 percent, as a 4 percent drop for multifamily housing was outweighed by a 7 percent gain for single family housing. Nonresidential building advanced 7 percent, with institutional building up 14 percent, commercial building up 7 percent, and manufacturing building down 26 percent.
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