Dodge Data economist weighs in on coronavirus’ potential impact

Branch

Total construction starts lost 1 percent from January to February, dropping to a seasonally adjusted annual rate of $767.5 billion.

The activity moved the Dodge Index to 162 compared to the 165 posted in January.

“The good news is that heading into the coronavirus pandemic, construction starts were stable,” says Richard Branch, chief economist at Dodge Data & Analytics. “The economy was healthy, fueled by continued steady job growth.

“Of course, the pandemic’s effect on future starts is as yet unknown,” Branch adds. “Construction firms will need to deal with multiple issues, including supply chain disruptions, workforce constrictions due to the outbreak, and an economy that has moved from a pace near its long-term potential to a virtual stall within the space of a week.”

Over the next few months, Branch says a number of construction projects could experience start delays or require more time to complete based on shortages of supplies from China or a reduction in available labor due to spread of the virus.

“Still others may begin to see projects canceled outright due to a sudden circumstantial change in demand,” Branch says. “Planning data as reported to Dodge Data & Analytics will be watched closely to see if fissures are developing in the construction sector.”

According to Dodge Data, large projects in the office and health care sectors provided a boost for overall nonresidential building in February, while residential and nonbuilding construction starts moved lower.

With only two months of data available for 2020, Dodge Data says it is difficult to ascribe a 2020 trend. Still, some perspective can be gleaned by examining a 12-month moving total, the firm says.

For the 12 months ending February 2020, total construction starts were 3 percent higher than the previous 12-month period. By major category, nonresidential building starts were 3 percent higher while residential starts were up 1 percent, with nonbuilding starts increasing 7 percent.

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