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Construction Starts Show Sharp Contraction in April

Total construction starts declined 25 percent from March to April to a seasonally adjusted annual rate of $572.2 billion as COVID-19 and economic recession hit the construction sector, according to Dodge Data & Analytics. In April, nonresidential building starts fell 37 percent from March.

On a year-to-date basis through four months of 2020, total construction starts were 8 percent lower than the same period in 2019. Nonresidential building starts were off 14 percent, and were down 3 percent in April 2020, year over year. The Dodge Index tumbled to 121 (2000=100) in April from the 161 posted in March. This is the lowest reading of the Dodge Index since May 2014.

“The April starts data is definitely sobering, but also very much expected,” says Richard Branch, chief economist for Dodge Data & Analytics. “The near shuttering of the economy during April had a significant negative effect on the construction industry, leading to delays in both ongoing projects as well as those about to break ground. Even though parts of the country are beginning to reopen, and some areas that had paused construction are now restarting, it will be a very long road back to normalcy for the construction industry. Continued fear of a resurgence in the virus will lead to a continued reduction in economic activity over the coming months, affecting construction projects across the country. The economic and construction recoveries will remain sluggish until a vaccine or viable treatment becomes available.”

Nonresidential building starts crashed 37 percent from March to April reaching a seasonally adjusted annual rate of $170.2 billion―the lowest monthly reading since early 2014. April’s decline was much sharper than any single month-to-month drop seen during the Great Recession. The severity of the decline was widespread. Commercial starts fell 47 percent, while institutional construction starts lost 26 percent. As a result of the April data, nonresidential building starts were down 14 percent year-to-date. Commercial starts were down 18 percent year-to-date, and institutional starts dropped 6 percent. In the past twelve months, nonresidential building starts were down 3 percent from the previous twelve months. Commercial starts were down 1 percent, while institutional building starts were 3 percent lower.

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