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Construction Starts Step Back in September

Total construction starts dipped 18 percent in September to a seasonally adjusted annual rate of $667.7 billion, according to Dodge Data & Analytics. Analytics say the dip essentially takes back August’s gain. While some of this decline is certainly payback from several large projects entering start in August, the drop in activity brought total construction starts below levels seen in June and July. Nonresidential starts fell 24 percent.

Year-to-date through nine months, total construction starts were down 14 percent from the same period in 2019. Nonresidential starts were lower by 26 percent, and for the 12 months ending September 2020, total construction starts were down 8 percent from the 12 months ending September 2019. Nonresidential building starts were 19 percent. In September, the Dodge Index fell 18 percent to 141 (2000=100) from the 173 reading in August. September’s Dodge Index was down 23 percent compared to a year earlier and 21 percent lower than its pre-pandemic level in February.

“That construction starts took a significant step back in September is disappointing, but also not surprising,” says Richard Branch, chief economist for Dodge Data & Analytics. “The economic recovery has lost momentum and is showing strain since support provided to consumers and businesses from expanded unemployment insurance benefits and the Paycheck Protection Program have expired. The worsening budget crisis for state and local areas has also slowed growth in public project starts, particularly in the face of a somewhat uncertain outlook for federal infrastructure spending programs. The road to recovery will continue to be uneven and fraught with potholes until a vaccine is developed and widely adopted across the U.S.”

Nonresidential building

Nonresidential building starts were down sharply over the month of September, falling 24 percent to $177.4 billion. There was little good news in the detail: institutional starts fell 8 percent, manufacturing starts were 48 percent lower, and commercial starts dropped 36 percent. Only two building types posted a gain in September―retail and public buildings.

The two largest nonresidential building projects to break ground in September were the $330 million second phase of the Iceberg Towers in Burbank, California, and the $330 million East Market Mixed-Use complex in Philadelphia. These projects were followed by the $296 million first phase of the Moffitt Cancer Center Hospital in Tampa, Florida.

Year-to-date through nine months, total nonresidential building starts were down 26 percent. Commercial starts declined 27 percent, while institutional starts were 18 percent lower. Manufacturing starts dropped a painful 56 percent compared to the first nine months of 2019. For the 12 months ending September 2020 total nonresidential building starts slid 19 percent. Institutional building starts were 16 percent lower, commercial starts down 19 percent and manufacturing starts plummeted 30 percent in the 12 months ending September 2020.