June Construction Starts Climb 9%

New York, New York (July 24, 2019)—New construction starts in June advanced 9% from the previous month to a seasonally adjusted annual rate of $832.7 billion, according to Dodge Data & Analytics. The increase followed the 10% gain reported for May, as total construction starts continued to strengthen following April’s subdued performance. 

By major sector, much of the lift in June came from a 16% jump for nonresidential building, which reflected the start of the $1.1 billion expansion to Terminal 5 at Chicago’s O’Hare International Airport, as well as sharp gains for office buildings, public buildings (detention facilities and courthouses), healthcare facilities and warehouses. 

The other two major sectors registered moderate growth in June, with nonbuilding construction up 6% and residential building up 5%. Through the first 6 months of 2019, total construction starts on an unadjusted basis were $378.8 billion, down 8% from the same period a year ago. On a 12-month moving total basis, total construction starts for the 12 months ending June 2019 were 4% below the amount for the 12 months ending June 2018.

June’s data raised the Dodge Index to 176 (2000=100), compared to an upwardly revised 161 for May. June’s reading was the highest so far for the Dodge Index during 2019, topping the 175 for March and coming in slightly above the full year 2018 average for the Dodge Index at 172. On a quarterly basis (which helps to lessen the volatility present in the monthly data), the index edged up 1% during the second quarter of 2019, helped by the improved activity in May and June after a weak April. 

This followed a 7% decline during this year’s first quarter compared to the final 3 months of 2018. “On balance, the pace of construction starts has been sluggish so far in 2019, as activity has been generally lower than the healthy amount reported during the first half of 2018,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “The improved activity during May and June suggests that the gap relative to last year should narrow in coming months.”

“Several features of the first half of 2019 stand out, as shown by the construction start statistics,” Murray continued. “For nonresidential building, the commercial and institutional building segments have stayed close to their 2018 amounts, but manufacturing plant construction has not seen the same number of very large projects that were reported last year. For nonbuilding construction, electric utility starts have witnessed renewed growth after several years of decline, but public works construction was generally lackluster in early 2019 and the dollar amount of new pipeline projects is down considerably from last year.  

“For residential building, single-family housing remains generally flat, adversely affected by affordability constraints. In addition, multifamily housing has lost momentum following its 2018 rebound, yet the occasional strong month like June suggests that this year’s multifamily pullback is likely to stay moderate.”

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