October construction starts down after a strong September

By |  November 22, 2016

New construction starts in October decreased 4 percent to a seasonally adjusted annual rate of $678.9 billion, settling back from the elevated amount that was reported in September, according to Dodge Data & Analytics.

Nonresidential building retreated from its fast September pace, which was this sector’s strongest volume so far in 2016. October’s level for nonresidential building was still healthy compared to what’s been reported for much of 2016, Dodge Data & Analytics reports. While it was down 12 percent from its average for August and September, it remained 15 percent above its lackluster average for this year’s first seven months.

Residential building in October showed moderate growth, with contributions from both single family and multifamily housing. Nonbuilding construction in October edged up slightly, as an increase for public works offset diminished activity for electric utilities and gas plants.

According to Dodge Data & Analytics, October’s data produced a reading of 144 for the Dodge Index compared to 149 in September and 152 in August. The quarterly averages for the Dodge Index in 2016 show the first quarter at 149, the second quarter at 138 and the third quarter at 142, with the average over the first nine months of the year coming in at 143. Although October’s pace for total construction starts is down from August and September, it’s still up from the third quarter.

“After a sluggish second quarter, the pace of construction starts picked up during the third quarter,” says Robert A. Murray, chief economist at Dodge Data & Analytics. “On this basis, October is at least maintaining improvement. While there was concern earlier in 2016 that the often-hesitant expansion for construction could be stalling, the generally stronger activity in August, September and now October eases those concerns.”

Additionally, year-to-date comparisons have strengthened throughout this year, with total constructions down only 1 percent through the first 10 months of 2016, Murray adds.

“On balance, the current year is turning out to be one where the overall level of construction starts is at least holding stead,” Murray says. “Supportive elements are moderate job growth, generally healthy market fundamentals for commercial real estate and the funding coming from the state and local bond measures passed in recent years.”

Dodge Data & Analytics is a technology-driven construction project data, analytics and insights provider.

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