December 2018 construction starts decline, 2018 total boasts improvement

Chart courtesy of Dodge Data & Analytics

New construction starts in December fell 10 percent to a seasonally adjusted annual rate of $708.9 billion, reports Dodge Data & Analytics. The December statistics produced a reading of 150 for the Dodge Index (2000=100), down from 167 in November and 179 in October.

In December, each of the three main construction sectors saw decreased activity: nonresidential building dropped 14 percent, residential building decreased 8 percent and nonbuilding construction fell 9 percent.

Nonresidential in December was $242.8 billion, down 14 percent from November. The commercial building categories as a group fell 27 percent after registering a 15 percent increase in November. In addition, office construction fell 34 percent, hotel construction plunged 41 percent, commercial garages fell 30 percent and warehouses decreased 24 percent. Store construction, however, rose 32 percent.

The institutional building categories as a group increased 1 percent in December, with educational facilities climbing 27 percent and public buildings advancing 48 percent. In addition, church construction was up 18 percent and transportation terminals were up 1 percent. Despite this, amusement-related work fell 42 percent and healthcare facilities dropped 16 percent.

Residential building in December was $300.6 billion, down 8 percent from the previous month. Multifamily housing retreated 15 percent, and single-family housing dropped 5 percent.

Finally, nonbuilding construction in December was $165.5 billion, down 9 percent from November. In this sector, the electric/gas plant category plunged 74 percent, the public works categories rose 26 percent, and highway and bridge construction climbed 19 percent. In addition, the miscellaneous public works category surged 80 percent, sewer construction rose 26 percent, river/harbor development increased 8 percent and water supply construction advanced 4 percent.

“The monthly pattern of construction starts was mixed during 2018, as elevated activity in June and October was offset by weaker activity in the months immediately following, with the end result being that the 2018 dollar amount of construction starts was slightly above the previous year,” says Robert Murray, chief economist for Dodge Data & Analytics. “By recent standards, the overall level of construction starts in 2018 can be regarded as healthy, but the substantially slower rate of growth compared to the prior six years is suggestive of a market that’s close to a peak.”

2018 total construction starts

Photo by Allison Barwacz

For 2018 as a whole, total construction starts increased 0.3 percent to $789 billion, following 7 percent gains in both 2016 and 2017. According to Dodge Data & Analytics, the 2018 increase for total construction starts was restrained by a 31 percent plunge for the utility/gas plant category.

Nonresidential building in 2018 fell 1 percent to $282.8 billion after its 11 percent increase in 2017. The institutional building segment skyrocketed 126 percent and the commercial building segment rose 1 percent.

Residential building in 2018 was $323.5 billion, up 5 percent, with multifamily housing up 8 percent and single-family housing up 4 percent.

Nonbuilding construction in 2018 as a whole dropped 5 percent to $182.7 billion. According to Dodge Data & Analytics, much of the decline came from the 31 percent slide for the electric utility/gas plant category. In 2018, the public works categories as a group held steady while the miscellaneous public works category fell 11 percent.

“There were several noteworthy features that stand out in the 2018 construction starts data,” Murray says. “Last year’s brisk economic expansion enabled market fundamentals for multifamily housing and commercial building to strengthen, which supported more growth for apartment projects, office buildings and hotels.”