Construction starts step back in September 2020

Total construction starts dipped 18 percent in September to a seasonally adjusted annual rate of $667.7 billion, essentially taking back August’s gain, according to a Dodge Data & Analytics report.

While some of this decline is payback from several large projects entering start in August, Dodge says the drop in activity brought total construction starts below levels seen in June and July.

Nonresidential starts fell 24 percent, while residential building dropped 21 percent over the month. Nonbuilding starts were 5 percent lower than August.

Through nine months of 2020, total construction starts were down 14 percent from the same period in 2019. Nonresidential starts were lower by 26 percent and nonbuilding was down 18 percent. Residential starts gained 1 percent.

For the 12 months ending in September 2020, total construction starts were down 8 percent from the 12 months ending in September 2019.

Nonresidential building starts were 19 percent lower and nonbuilding starts were 11 percent lower, while residential building starts rose 4 percent over the 12 months ending in September 2020.

In September, the Dodge Index fell 18 percent to 141 from the 173 reading in August. September’s index was down 23 percent compared to a year earlier and 21 percent lower than its pre-pandemic level in February.

“That construction starts took a significant step back in September is disappointing, but also not surprising,” says Richard Branch, chief economist at Dodge Data & Analytics. “The economic recovery has lost momentum and is showing strain since support provided to consumers and businesses from expanded unemployment insurance benefits and the Paycheck Protection Program have expired. The worsening budget crisis for state and local areas has also slowed growth in public project starts, particularly in the face of a somewhat uncertain outlook for federal infrastructure spending programs. The road to recovery will continue to be uneven and fraught with potholes until a vaccine is developed and widely adopted across the U.S.”

Nonbuilding construction

Nonbuilding construction fell 5 percent in September to a seasonally adjusted annual rate of $176.3 billion. Highway and bridge starts rose for the third consecutive month, jumping 10 percent, while utility/gas plant starts moved up 21 percent. However, environmental public works and miscellaneous nonbuilding starts each lost 26 percent over the month.

Nonresidential building

Nonresidential building starts were down sharply over the month of September, falling 24 percent to $177.4 billion. There was little good news in the detail: institutional starts fell 8 percent, manufacturing starts were 48 percent lower, and commercial starts dropped 36 percent. Only two building types posted a gain in September: retail and public buildings.

Residential building

Residential building starts lost 21 percent in September, falling to a seasonally adjusted annual rate of $314 billion. Single-family starts dropped 6 percent in the month, as multifamily starts tumbled 54 percent.