July construction starts decline 2 percent

New construction starts in July fell 2 percent from June at a seasonally adjusted annual rate of $586.3 billion, according to Dodge Data & Analytics. The drop lowered the Dodge Index from 126 to 124.

A drop in electric utilities pulled down the nonbuilding sector, which contributed to the slight decline in total construction starts. However, both nonresidential building and residential building experienced improvements in July, Dodge Data reports.

During the first seven months of 2016, total construction starts were at $372.2 billion, down 11 percent from the same period one year ago, according to Dodge Data. The January-to-July period of 2015 featured 13 large projects valued at $1 billion or more, including a $9 billion liquefied natural gas export terminal in Texas, an $8.5 billion petrochemical plant in Louisiana and two massive office towers in New York City.

After the improved pace reported during the first three months of 2016, the construction start statistics showed an up-and-down pattern during the April to June period, and June’s 7 percent slide has now been followed by a 2 percent drop in July.

“While the loss of momentum for total construction starts in June and July may raise some concern about the overall health of the construction industry, it’s useful to keep in mind that the recent declines were tied to two segments – public works and electric utilities – that are prone to volatility on a month-to-month basis,” says Robert Murray, chief economist at Dodge Data. “June’s retreat for total construction reflected a pullback by public works after a strong performance in May, and July’s retreat for total construction reflected a subdued amount of electricity utility starts for that month.”

According to Dodge Data, non-building construction plunged 17 percent in July to $121.7 billion. The electric utility and gas plant category fell 56 percent in July, while the public works group was unchanged from the previous month.

Nonresidential building grew 4 percent in July, following its 7 percent gain in June. This increase is likely due to greater activity in both the commercial building and manufacturing plant segments, Dodge Data says. Large office building projects that broke ground in July included a $400 million data center in Grand Rapids, Mich.; a $133 million office building in Dallas; and a $100 million Comcast office building at Sun Trust Park in Atlanta.

In addition, residential building increased 3 percent to $276.7 billion, rebounding after a 3 percent decline reported in June, according to Dodge Data. Multifamily housing provided the upward push, rising 9 percent. During the first seven months of 2016, the top five metropolitan areas ranked by the dollar amount of new multifamily starts included New York City, Miami, Chicago, Los Angeles and Boston.