Construction Starts Post Solid Gain in August
Total construction starts rose 19 percent in August to a seasonally adjusted annual rate of $793.3 billion, according to Dodge Data & Analytics. Gains were seen in all three major building sectors: nonresidential building starts rose 16 percent and residential building climbed 12 percent, while nonbuilding construction jumped 40 percent over the month. While large projects certainly influenced the August gains, removing those projects would still have resulted in a gain for the month.
Year-to-date through the first eight months of the year, starts were 14 percent lower than in the same period in 2019. Nonresidential starts were 24 percent lower and nonbuilding starts were down 20 percent. For the 12 months ending August 2020, total construction starts declined 6 percent from the 12 months ending August 2019. Nonresidential building starts fell 13 percent and nonbuilding starts were 9 percent lower in the 12 months ending August 2020. In August, the Dodge Index rose 19 percent to 168 (2000=100) from the 141 reading in June. The Dodge Index was down 8 percent compared to a year earlier and 6 percent lower than its pre-pandemic level in February.
“Construction starts continue to make up ground following the nadir in activity in April,” says Richard Branch, chief economist for Dodge Data & Analytics. “Residential and commercial construction are driving the gains, while the public side of building construction is proving to be a drag on growth. The regional pattern has also evened out with gains in starts seen in every region but the Midwest in August—somewhat muting the concern over the potential impact of rising COVID cases in the South and West. The nascent recovery in starts, however, will face challenges as summer turns to fall. The expiration of enhanced unemployment insurance benefits and small business loans that were provided in the CARES Act, the budget crises facing state and local governments, and the impending expiration of the FAST Act on September 30 will all have a dampening effect on starts.”
On a year-to-date basis, total nonresidential building starts were 24 percent lower than in the first eight months of 2019. Institutional building starts dropped 16 percent, while commercial starts slid 27 percent and manufacturing starts were 47 percent lower than a year earlier. Over the 12 months ending August 2020, total nonresidential building starts were down 13 percent from the 12 months ending in August 2019. Commercial starts were 16 percent lower, institutional starts were down 13 percent, and manufacturing starts slipped 1 percent.