Construction Starts Flat for Full-Year 2018

For 2018 as a whole, total construction starts increased a slight 0.3 percent to $789.0 billion, according to Dodge Data & Analytics. This came after 7 percent gains in both 2016 and 2017, as well as 11 percent to 14 percent gains from 2012 through 2015. 

The 2018 increase for total construction starts was restrained by a 31 percent plunge for the electric utility/gas plant category. If electric utilities and gas plants are excluded, total construction starts for 2018 would be up 2 percent from 2017. 

Highway and bridge construction starts in 2018 increased 5 percent.

The slight 0.3 percent increase for total construction starts at the national level in 2018 was the result of gains in four of the five major regions – the South Central, up 10 percent; the Midwest, up 4 percent; and the South Atlantic and the West, each up 1 percent. The Northeast experienced a 15 percent decline for total construction starts in 2018, following its 20 percent jump in 2017.

“The monthly pattern of construction starts was mixed during 2018, as elevated activity in June and October was offset by weaker activity in the months immediately following, with the end result being that the 2018 dollar amount of construction starts was slightly above the previous year,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “By recent standards, the overall level of construction starts in 2018 can be regarded as healthy, but the substantially slower rate of growth compared to the prior six years is suggestive of a market that’s close to a peak.” 

“There were several noteworthy features that stand out in the 2018 construction starts data,” Murray continued. “Last year’s brisk economic expansion enabled market fundamentals for multifamily housing and commercial building to strengthen, which supported more growth for apartment projects, office buildings, and hotels. However, store construction continued to decline, adversely affected by the glut of retail space produced in the previous decade as well as by the greater role now played by e-commerce. Single-family housing showed improvement early in 2018, but then plateaued and began to recede given affordability constraints. The institutional building segment showed more growth for educational facilities and witnessed a number of major transportation terminals reach groundbreaking, although not to the same extent as what took place in 2017. Public works construction benefitted from the 2018 omnibus federal appropriations bill passed last March, as well as funding arising from recent state transportation bond measures. Going forward into 2019, economic growth is not expected to be as strong as what occurred during 2018, which may dampen groundbreaking for multifamily housing and commercial building projects. In addition, more growth for public works this year requires that federal appropriations for fiscal 2019 get finalized without much further delay.”

For 2018 as a whole, nonresidential building eased back 1 percent to $282.8 billion after its 11 percent increase in 2017. A major reason for the double-digit gain in 2017 was an 18 percent jump by the institutional building segment, which benefitted from a sharp 126 percent hike for transportation terminal starts. 

The 2018 amount for residential building was $323.5 billion, up 5 percent. Multifamily housing grew 8 percent in 2018, rebounding from the 8 percent decline that was reported for 2017.

For the full-year 2018, nonbuilding construction dropped 5 percent to $182.7 billion. Much of the decline came from the 31 percent slide for the electric utility/gas plant category in 2018, which reflected a decreased amount of large natural-gas fired power plants reaching the construction start stage relative to 2017. 

The public works categories as a group held steady in 2018, following a 19 percent jump in 2017. The miscellaneous public works category, which fell 11 percent in 2018 after surging 43 percent in 2017, played a large role in shaping the recent yearly pattern for public works. 

Highway and bridge construction starts in 2018 increased 5 percent, maintaining the upward track after 2017’s 14 percent advance. The top five states ranked by the dollar amount of highway and bridge construction starts, with their percent change from the previous year, were – Texas, up 24 percent; California, up 34 percent; Florida, up 13 percent; New York, up 5 percent; and Pennsylvania, up 5 percent.

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