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New Construction Starts Drop in August
All Components of Dodge Index Decline





The August Dodge Index, a measure of nationwide construction activity, fell 16 points from July to August. It's major components are residential, non-residential and non-building, all of which declined.


The Dodge Index, a gauge of new construction starts, fell in August, as all three of its components declined, Dodge Data and Analytics said.

New construction starts fell 11 percent for the month to $554.5 billion, and those results lowered the Dodge Index to 117 from a reading of 133 in July. The benchmark level of the Dodge, which began in 2000, is the number 100.

"While August construction starts were notably subdued compared to recent months, it's useful to keep in mind that construction starts on a monthly basis will often show an up-and-down pattern, and the year-to-date statistics depict an expansion that's still proceeding," Robert A. Murray, chief economist for Dodge Data and Analytics, said.

Non-residential building activity in August dropped 16 percent to $160.7 billion. The commercial segment shed 24 percent; hotels plunged 35 percent; and offices declined 34 percent. However, store construction rose 3 percent, while warehouses gained 2 percent. The manufacturing sector slipped 2 percent.

"For nonresidential building, the early months of 2015 did show some deceleration for the commercial categories, consistent with the slower pace of economic growth in the first quarter," Murray said.

"Manufacturing plant construction is now retreating after the exceptional amount of energy-related plant investment in 2014," Murray added. "At the same time, market fundamentals for commercial building are still positive, and commercial building projects at the planning stage have recently increased. This suggests that the pace of commercial building starts, while lackluster in August, should soon pick up."

Residential building, at $265.5 billion, lost 8 percent. Multifamily housing retreated 23 percent, and the single-family segment improved 1 percent. By region, the Northeast was up 8 percent, while all other areas experienced very little change.

"For residential building, the August decline was due to a slower pace for multifamily housing after a particularly strong July," Murray said, "but the upward trend for this sector remains intact."

Nonbuilding construction in August dropped 12 percent to $128.3 billion. Public works segments were down 15 percent in August collectively. Highway and bridge construction shed 15 percent. Water supply projects declined 17 percent, while sewer construction was up 23 percent.

"For nonbuilding construction, highway and bridge starts have slipped from the elevated activity reported earlier in 2015, and at midyear there was uncertainty related to the depleted Highway Trust Fund," Murray said. "At the end of July, Congress approved $8 billion to shore up the Highway Trust Fund, although there's still some uncertainty as to when Congress will be able to pass a new multiyear federal transportation bill."

Year-to-date (January to August) totals are as follows: Residential building has advanced 18 percent; the nonresidential category dropped 5 percent; and non-building construction has surged 43 percent.

By major region, year-to-date total construction starts are as follows: South Central, up 31 percent; Northeast, an increase of 20 percent; South Atlantic, a hike of 14 percent; West, up 6 percent; and the Midwest, an improvement of 4 percent.

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March 23, 2017, 1:15 pm PDT

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Last Updated 03-20-17