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Construction Starts Off 7 Percent in June08-03-16 | News

Construction Starts Off 7 Percent in June
Residential Activity Declines 2 Percent

Staff

The Dodge Index dropped to 126 in June, from 135 in May. A sight decline in single-family and multifamily building was partly to blame. But the biggest reason was a precipitous drop in public works and utilities.

Weakness in the public works and utilities sectors "?u along with a slight dip in residential activity "?u caused new construction starts to drop 7 percent in June.

As a result, the Dodge Index fell to 126 from 135 versus May.

Single-family starts slipped 1 percent, while multifamily projects were off by 5 percent. Taken together, the residential sector fell 2 percent.

From January to June, total starts have dropped 11 percent, compared to the same six-month time frame of 2015, Dodge Data and Analytics said.

The Dodge Index has been in a seesaw pattern this year. It was up in the first quarter, but then declined in the second quarter. It rebounded in May and has dropped once again in June.

"The construction start statistics on a monthly basis continue to show an up-and-down pattern," said Robert A. Murray, chief economist for Dodge Data. "This has often been due to the presence or absence of very large projects for a given month, which most recently applies to the May and June behavior for public works and electric utilities."

The nonbuilding component of the Dodge Index plummeted 24 percent, due largely to a 27 percent decrease in public works projects, and a 65 percent plunge in oil and natural gas pipelines, or utilities.

Nonresidential starts grew 6 percent, led by a 9 percent hike in commercial projects. Hotels advanced 36 percent, while offices jumped 19 percent. Stores and warehouses dropped 4 percent and 17 percent, respectively. Manufacturing fell 29 percent.

Institutional starts rose by 7 percent, led by a 22 percent gain in the health care field. Educational facilities were up 1 percent, while public buildings dropped 4 percent; churches declined 18 percent; and amusement park-type projects fell 23 percent.

Dodge Momentum Index
Separately, sharp rises in institutional and commercial planned projects caused the Dodge Momentum Index to surge more than 11 percent in June.

The Dodge, now at its highest level since early 2009, jumped to 134.4 from a revised May reading of 120.8 The Momentum Index measures solely nonresidential building projects in the earliest planning stages. These projects typically lead actual construction spending by up to a year.

"The gain in commercial planning reports is a positive development, since that component of the Index had been moving in a fairly horizontal fashion since late-2014," officials at Dodge Data and Analytics said. Dodge's institutional component has also returned to levels seen earlier this year.