- Manufacturing starts, which had been an ironclad sector of resilience for builders so far this year, plunged 68% in April. The nosedive brought total construction kickoffs down 4% for the month to a seasonally adjusted annual rate of $1.04 trillion, according to Dodge Construction Network.
- Despite that monthly decline, on a year-to-date basis, nonresidential building starts — a category that includes manufacturing — were still up 7% through April. Likewise, starts in the nonbuilding category — consisting of highways, dams and power plants — grew 16%, although residential starts declined 27% compared to the same period last year.
- That longer-term momentum for nonresidential construction provided a silver lining to April’s slump. “While the presence, or lack thereof, of large manufacturing projects each month has made the data more volatile, the underlying trends point to a very healthy sector,” said Richard Branch, chief economist for Dodge Construction Network. “The construction sector continues to sweep its economic worries under the rug, even with inflation, unstable banking and the potential breach of the U.S. debt ceiling.”
The dip follows Branch’s warning last month that starts were “likely to erode” from their previous highs, and in many cases, that is beginning to play out on a monthly basis.
The mixed monthly bag across different sectors in April led Branch to conclude that construction’s staying power could be temporary. The Dodge Momentum Index, which tracks projects entering the earliest stages of planning, is falling and “should lead to weaker starts in the second half of the year — especially for the private sector,” he said.
For example, nonresidential building starts declined 22% in April to a seasonally adjusted annual rate of $383 billion, predominantly due to the sharp decline in manufacturing builds. Still, on a year-to-date basis, manufacturing starts remained up 4% compared to the first four months of 2022, according to the report.
Meanwhile, commercial starts, which include retail, warehouse, office, garage and hotel, increased 5% in April. But institutional starts, including schools and hospitals, pulled back 13%, due to slower activity in healthcare construction.
The largest nonresidential building projects to break ground in April included:
- The $1.2 billion Hanwha Qcells solar plant manufacturing plant in Cartersville, Georgia.
- The $650 million Group14 battery plant in Moses Lake, Washington.
- The $600 million Mutual of Omaha headquarters in Omaha, Nebraska.
While down 27% year-to-date, residential building starts jumped 12% in April to a seasonally adjusted annual rate of $373 billion. Both single-family and multifamily starts posted strong activity for the month, growing 14% and 10%, respectively, according to the report. The largest multifamily structures to break ground in April included:
- The $549 million Mana’olana Place mixed-use building in Honolulu, Hawaii.
- A $500 million mixed-use building in Flushing, New York.
- The $385 million 710 Broadway Apartment in Santa Monica, California.
Nonbuilding construction starts, such as infrastructure projects, jumped 7% in April to a seasonally adjusted rate of $281 billion. The utility and gas plant category soared 76% in the month, while street and bridge starts climbed 5%, according to the report.
The largest nonbuilding projects to break ground in April included:
- The $750 million Magnolia Power Kindle Energy generating station in Plaquemine, Louisiana.
- The $738 million Rock Creek wind farm in Laramie, Wyoming.
- The $542 million Eagle LNG export facility in Jacksonville, Florida.
Cloudy forecasts ahead
Dodge’s Momentum Index, which measures nonresidential building planning, dropped for the second consecutive month in April, when it lost 5.1%. The index typically leads actual construction activity spending by 12 months.
That decline followed a larger 8.6% decline in March, predominantly due to tightened lending standards, said Sarah Martin, associate director of forecasting for Dodge Construction Network.
Branch said last month that starts are likely to lose momentum as the year goes on, especially as bank industry uncertainty begins to creep into the data.