One month after the biggest increase in construction starts this year, Dodge Data & Analytics reported that the value of projects launched in September fell 2% to a seasonally adjusted annual rate of $703.7 billion.
Dodge said a contraction in residential starts (-8% to $271.1 billion), buoyed by a series of multifamily projects in August, and a 2% drop in nonbuilding construction driven by a 72% dive in public works activity, caused the slight downturn.
- Year-to-date starts were valued at $506.7 billion, down 3% from January to September of 2015. If the up-and-down electric utility/gas plant category was eliminated from the calculations, Dodge said starts would be flat instead of down.
The dip in September starts forced the Dodge Index to 149, down three points from last month's upward-revised reading. However, September's year-over-year decline was less than both July's and August's, indicating that the new construction market is steadying, according to Dodge Data & Analytics Chief Economist Robert Murray, who added that job growth, a healthy commercial real estate market and an increase in state and local bond financing have kept construction starts from falling more than they have.
Bloomberg reported in August that local and state governments are taking advantage of current low interest rates in order to finance their infrastructure projects through bonds. This method of funding critical backlogs is so popular that Barclays told Bloomberg it expects municipal bond issues to hit $400 billion by the end of the year.
The nonresidential sector rose a modest 5% in September to an annual rate of $282.3 billion, an increase supported by a 148% gain in office construction featuring the $2 billion 3 Hudson Yards Boulevard office building and the $1.5 billion One Vanderbilt Tower, both in Manhattan.
Though suffering from a lack of multibillion-dollar public works projects, the nonbuilding sector's biggest start was a $244-million landfill in Staten Island, NY. Similarly, residential counted only five multifamily projects worth more than $100 million, down from 13 in August. Single-family starts were also down 4%, with weakening in the South Atlantic (-9%), South Central (-2%), West (-2%) and Midwest (-1%), while the Northeast was unchanged during the period.
Offering a look ahead, the September Dodge Momentum Index, a monthly measure of how many nonresidential projects are in the planning stages, dropped 4.3% to a reading of 129, down five points from August. Dodge said the culprits in the expected decline were the commercial (-3.6%) and institutional (-5.3%) sectors.