Dive Brief:
- Following a 2% September drop, Dodge Data & Analytics reported that the value of project starts in October fell another 4% to a seasonally adjusted annual rate of $678.9 billion, an indication that starts are continuing to move toward a more normal pattern after a burst of activity in August.
- Dodge said that although the nonresidential building segment fell 12% in October from its August-September level, it was still 15% higher than it was from January to July. Residential starts were up 6% due to both single-family (6%) and multifamily (5%), while nonbuilding starts inched up 1% as a rise in public works projects counterbalanced the lack of electric utilities and power plant activity.
- Year-to-date starts for January to October were valued at $572 billion, down 1% from the same period in 2015. If the erratic electric utility-gas plant category was removed from the calculations, Dodge said total starts would be up 3%.
Dive Insight:
The downturn in October starts pushed the Dodge Index to 144, down five points from September and eight points from August. However, the October Index reading still beat 2016's second and third quarter readings.
According to Dodge Data & Analytics Chief Economist Robert Murray, this indicates that construction has not flat-lined as some feared. State and local bond initiatives like California's $9 billion Proposition 51, which will fund school construction, and President-elect Donald Trump's call for increased infrastructure investment, Murray said, should also help to continue industry expansion.
Looking forward, the October Dodge Momentum Index, a monthly measure of how many nonresidential projects are in the planning stages, rose 4.1% to a reading of 133.6, up about five points from September's downwardly adjusted number of 128.3 and driven by increases in both commercial (6.1%) and institutional (1.4%) development.
The 1% year-to-date decline in starts differs slightly from Dodge's predictions for the year in its 2017 Outlook report. However, a slight uptick in the end of 2016 could bring the year's total figure closer to the predicted 1% bump. In the Outlook report, Murray predicted that the construction industry's period of growth will continue into 2018, then a cyclical slowdown will emerge in 2018 and 2019.