Street and Bridge Projects Increased 10% for the Month.
By Mark S. Kuhar
New construction starts dropped 6% over the month of August to a seasonally adjusted annual rate of $807.1 billion, according to Dodge Data & Analytics. August’s decline breaks a string of consecutive month-to-month gains since May.
Year-to-date through eight months, total construction starts were 5% lower than the same period a year ago due to declines in residential and nonresidential buildings. Nonbuilding construction activity was 3% higher through the first eight months of the year due to gains in electric utilities/gas plants.
By major sector, nonbuilding construction fell 15% in August, reversing the large increases made in the previous month when several notable projects started. The declines in residential and nonresidential building were milder – falling 1% and 3%, respectively, in August.
“The August decline was expected after July’s robust level of starts,” stated Richard Branch, chief economist for Dodge Data & Analytics. “Furthermore, the year-to-date activity continued to suggest that this year’s levels are easing back from what was seen in 2018 – essentially mirroring the slowdown in overall economic growth.”
Nonbuilding Construction
Nonbuilding construction starts reached $217.4 billion (at a seasonally adjusted annual rate) in August, a 15% decline from the previous month. Environmental public works (drinking water, sewers, hazardous waste, and other water resource projects) fell 43% from July to August, while miscellaneous nonbuilding fell 32%.
Both types of construction had shown remarkable strength in July as work on several large projects got underway. Offsetting these declines was a 10% increase in street and bridge projects. The electric utility/gas plant category also gained 9% over the month.
The largest nonbuilding construction project to start work in August was the $2 billion Permian Highway Pipeline Project in Texas. Also breaking ground during the month was the $840 million Lynwood Link Extension rail line in Washington and the $625 million Palen Solar Farm in Desert Center, Calif.
Through the first eight months of 2019, nonbuilding construction was 3% higher than 2018. However, environmental public works and electric utility/gas plants were the only categories within nonbuilding construction registering a positive year-to-date gain.
Nonresidential Building
Nonresidential building starts dropped 3% from July to August, to $283.9 billion (at a seasonally adjusted annual rate). August’s decline was the direct result of a 66% drop in manufacturing starts, which had soared in July when the $1.0 billion Foxconn manufacturing complex broke ground in Mount Pleasant, Wis. Commercial construction starts rose 7% in August to $135.2 billion (annual), the result of increases in offices and warehouses. Institutional starts rose 2% in August to $138.2 billion (annual) due to increases in health and education facilities.
Several notable nonresidential projects got underway in August, including the $450 million Joan Paul Rubschlager University Cancer Care Center in Chicago and two Facebook data centers – a $400 million facility in Altoona, Iowa, and a $350 million building in New Albany, Ohio.
Through the first eight months of 2019, nonresidential building starts totaled $188.2 billion, a decline of 7% over the same time frame of 2018. Commercial starts were 3% higher year-to-date, fueled by gains in offices, warehouses, and parking structures. Starts for stores and hotels were lower through the first eight months of this year. Institutional construction was 5% lower year-to-date at $92 billion with declines evident across all institutional categories. Manufacturing construction starts were 46% lower year-to-date.
Residential Building
Residential building fell 1% during the month to $305.8 billion. Single-family construction was 3% lower, overwhelming a 3% gain in multifamily starts.
The month-to-month growth in multifamily housing was aided by the start of a $600 million apartment complex on West 29th Street in New York. Also breaking ground during the month was the $515 million Brookfield residential tower in Los Angeles and the $223 million Sendero Verde mixed-use project in New York.
On a year-to-date basis, total residential construction was 8% lower than during the first eight months of 2018 at $211.3 billion. Single-family construction was 6% down, while multifamily declined 13% through eight months.
Monthly Construction Starts (Seasonally Adjusted Annual Rates, In Millions of Dollars) | Aug. 2019 | July 2019 | % Change |
Nonresidential Building | $283,925 | $292,973 | -3 |
Residential Building | $305,765 | $309,333 | -1 |
Nonbuilding Construction | $217,381 | $256,459 | -15 |
TOTAL Construction | $807,071 | $858,765 | -6 |
Source: U.S. Dept. of Commerce |
Year-to-Date Construction Starts (Seasonally Adjusted Annual Rates, In Millions of Dollars) | 8 Mos. 2019 | 8 Mos. 2018 | % Change |
Nonresidential Building | $188,218 | $201,646 | -7 |
Residential Building | $211,369 | $228,963 | -8 |
Nonbuilding Construction | $135,709 | $131,794 | +3 |
TOTAL Construction | $535,296 | $562,402 | -5 |
Source: U.S. Dept. of Commerce |