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06-19-20 | Economic News

Construction Starts Up Slightly in May

Follows Huge Drop in April
by Staff

The Dodge Index, which measures total construction starts, expanded to 126 in May compared to the score of 121 in April.

After a disastrous April that tallied a 25% monthly decline, total construction starts rose 3% in May, thanks in part to several large nonresidential building projects that broke ground. By sector, nonresidential buildings increased 8%, residential building starts rose 4% but nonbuilding starts decreased 4%.

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A better gauge of the state of the construction industry might be found in year-over-year starts numbers, which are down 12% from January through May of 2020 compared to the same period in 2019. During the first five months of this year, nonresidential starts contracted 19%, nonbuilding starts shrank 16% and residential starts faded 3%.
Year-to-year totals were not as dour since for the 12 months ending May 2020, compared to the same period a year earlier, construction starts were down 1%, with nonbuilding starts actually ahead 5% and residential starts up 1%. Nonresidential starts, however, came in 7% lower.

"While May's increase in construction starts is certainly good news, the influence of several large projects undermines the notion that the construction sector has fully entered recovery," stated Richard Branch, chief economist for Dodge Data & Analytics. "Even as state and local areas re-open and bans on construction activity in Boston, New York City and other areas are lifted, the sector will have to contend with digging itself out from a deep economic recession.
"While the overall economy most likely hit bottom in May, the recovery will be slow since nearly 20 million jobs have been lost since February," evaluated Branch. "The second half of 2020 will be a slog and gains will be modest over the short term."

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