New construction starts up 11 percent in June

The 11 percent increase in June’s Dodge Index marks the second straight month of double-digit improvement. Chart courtesy of Dodge Data & Analytics.

New construction starts in June improved 11 percent to a seasonally adjusted annual rate of $896.3 billion, according to Dodge Data & Analytics.

The double-digit increase marked the second straight month of such improvement, following a 15 percent jump in May.

The uptick in June activity was boosted by a 57 percent advance for nonresidential building, which benefited from the start of two manufacturing plant projects and two office building projects. The two manufacturing projects were a $6.5 billion uranium processing facility in Oak Ridge, Tennessee, and a $1.7 billion petrochemical plant in Port Arthur, Texas. The two office projects were the $1.8 billion Spiral office tower in New York City and a $665 million office tower in Chicago.

Residential building in June climbed 4 percent, in part due to growth for multifamily housing. The nonbuilding construction sector, comprised of public works and electric utilities, declined 28 percent in June following a 37 percent increase in May, which was spurred by several natural gas pipelines and rail-related projects.

“The monthly pattern for construction starts will often reflect the presence or absence of very large projects, and after May received a lift from unusually large projects, it was even more true in June,” says Robert Murray, chief economist for Dodge Data & Analytics. “Following the lackluster activity in April, the strength shown during May and June enable the second quarter average for total construction starts to be up 3 percent from the first quarter, which itself was up 2 percent from the final three months of 2017.”

Through the first six months of 2018, total construction starts on an unadjusted basis were $395.7 billion, an increase of 1 percent from the same period in 2017. June’s data raised the Dodge Index to 190, compared to a revised 170 for May.

“On that basis, one can say that the expansion for construction starts continued at a modest pace during the first half of 2018,” Murray adds. “At the same time, it’s not expected that July will get the same support from large projects that took place in June.”