July 2017 construction starts up 6 percent

The value of new construction starts in July advanced 6 percent from the previous month to a seasonally adjusted annual rate of $728.1 billion, it was reported by Dodge Data & Analytics. Leading the way was a 26 percent jump by the nonbuilding construction sector, which reflected an improved level for public works and the start of two massive power plants, located respectively in California and New York.

Residential building in July increased 8 percent, as multifamily housing rebounded after three consecutive monthly declines. Running counter was a 7-percent slide for nonresidential building following its 14-percent hike in June, as both office buildings and hotels retreated from June’s elevated activity, outweighing a sharp rise for healthcare facilities in July.

During the first seven months of 2017, total construction starts on an unadjusted basis were $411.9 billion, down 1 percent from the same period a year ago. Dampening the year-to-date performance for total construction was a steep 44-percent decline for the electric utility/gas plant category, even with two massive power plants reported as July starts. If the electric utility/gas plant category is excluded, total construction starts in this year’s January-July period would be up 3 percent from a year ago.

July’s data lifted the Dodge Index to 154 (2000=100), compared to an upwardly revised 145 for June. After this year’s strong first quarter, the Dodge Index had receded 11 percent in the second quarter. July’s total construction gain brings activity back to within 2 percent of the first quarter’s pace.

“July’s increase means the third quarter began on a healthy note, which should help to maintain the up-and-down pattern on a quarterly basis that’s been present for construction starts over the past year,” says Robert A. Murray, chief economist for Dodge Data & Analytics.

“Within that up-and-down pattern there remains a modest upward trend, as it appears that construction starts are still in the process of reaching a peak, as opposed to having already reached a peak. Public works construction, after sluggish activity earlier in the year, is showing hesitant signs of improvement.

“It’s true that residential building is now seeing generally decreased activity for multifamily housing, but the monthly declines continue to be mixed in with monthly gains, such as what took place in July. For nonresidential building, growth is being supported by its institutional segment, while commercial building is leveling off due to varied behavior by its individual project types.”

Nonbuilding construction in July was $195.8 billion (annual rate), up 26 percent from June and achieving its second highest amount so far in 2017 after February. The public works categories as a group rose 12 percent, rebounding after a 7 percent decline in June. Water supply construction had a particularly strong month, soaring 136 percent with the lift coming from the start of the $844 million Vista Ridge water supply pipeline project in San Antonio

Highway and bridge construction increased 10 percent in July, and featured the start of the $322 million I-74 bridge replacement across the Mississippi River in Davenport, Iowa, a $192 million highway expansion in San Antonio, and a $94 million rehabilitation project on the Henry Hudson Parkway in New York City. Through the first seven months of 2017, the top five states in terms of the dollar amount of highway and bridge construction starts were Texas, California, Florida, Pennsylvania and Ohio.