February 2019 construction starts drop 3 percent

Click to enlarge. Chart courtesy of Dodge Data & Analytics

New construction starts in February dropped 3 percent from the previous month, according to Dodge Data & Analytics, to a seasonally-adjusted annual rate of $697.4 billion.

The decline in February returned construction starts to the downward trend from the end of 2018, contrasting a 2 percent increase in January.

The February statistics produced a reading of 148 for the Dodge Index, compared to 153 for January. The 150 average for the first two months of 2019 mirrors the 150 reading in December, which was the low water market for 2018 activity.

Two of the three main construction sectors registered weaker activity in February. Nonbuilding construction receded 8 percent, due to a pullback by its public works segment, while residential building dipped 3 percent. Nonresidential building, however, remained mostly in line with its January reading.

Total construction starts during the first two months of 2019, on an unadjusted basis, were $99.3 billion, down 12 percent from the same period in 2018, which was boosted by the start of the $2 billion NEXUS natural gas pipeline in Ohio and Michigan and the $1.3 billion NFL stadium in Las Vegas.

On a 12-month moving total basis, total construction starts for the 12 months ending February 2019 remained about even with the corresponding 12 months ending February 2018.

“The pace of construction starts has been lackluster in early 2019,” says Robert Murray, chief economist for Dodge Data & Analytics. “The public works sector has retreated, likely affected by harsh winter weather conditions and the fact that fiscal 2019 federal appropriations for several programs were not finalized until mid-February. With funding levels now set, including a 2 percent increase for the federal-aid highway program, it’s expected that public works will show improvement in the coming months.”

Nonbuilding construction in February was $153.6 billion, down 8 percent from January. The public works categories as a group dropped 15 percent, retreating for the second consecutive month, while the electric utility/gas plant category climbed 34 percent. Highway and bridge construction fell 7 percent after a 2 percent decline in January, and February’s activity was down 12 percent from the average 2018 monthly pace.

Residential building in February was $299.3 billion, down 3 percent as both sides of the housing market showed decreased activity. Multifamily housing dropped 7 percent following a 17 percent gain in January. However, there were still six multifamily projects valued at $100 million or more that reached groundbreaking in February. These were led by two projects in the Long Island area of New York City – the $500 million North Tower and the $200 million South Tower at the Hunters Point South apartment complex.

Nonresidential building in February was $244.5 billion, reflecting the same measure of January’s volume. The commercial building categories on the whole improved 2 percent following a 4 percent gain in January. Warehouse construction jumped 33 percent in February, led by a $200 million Amazon distribution facility in Oak Creek, Wisconsin; an $85 million Costco distribution center in Katy, Texas; and a $70 million Goodyear Tire distribution center in Forney, Texas. Hotel construction rose 22 percent, store construction climbed 11 percent and the commercial garage category grew 3 percent. Office construction, however, was the lone commercial project type to report a decline in February, dropping 21 percent after an 18 percent gain in January.

The institutional side of nonresidential building remained unchanged in February after the 2 percent decline reported in January. The healthcare facilities category rose 26 percent and educational facilities advanced 6 percent, while the public buildings category fell 45 percent and transportation terminal projects dropped 35 percent.

According to Dodge Data & Analytics, the 12 percent shortfall for total construction starts on an unadjusted basis during the first two months of 2019 compared to last year was the result of lower activity for each of the three main sectors. However, additional insight is provided by looking at 12-month moving totals – in this case, the 12 months ending February 2019 versus the 12 months ending February 2018, which offers less volatility than is present with year-to-date comparisons of just two months. On this basis, total construction starts for the most recent twelve months essentially matched the amount of the previous period.