New Construction Starts in April Decline 13%, Says Dodge Data & Analytics

The decline from the previous month was attributed to decreased activity in public works, institutional building and housing sectors.

NEW YORK — The value of new construction starts in April fell 13% from the previous month to a seasonally adjusted annual rate of $674.3 billion, according to Dodge Data & Analytics.

The decline follows the 11% gain reported for March, which was the highest level of construction starts over the preceding six months. The loss of momentum in April was widespread, involving each of the three main construction sectors.

Nonbuilding construction (public works and electric utilities/gas plants) plunged 22% after its 74% hike in March that featured the start of the $3.5 billion Mountain Valley Pipeline expansion in West Virginia and Virginia, as well as several large highway projects.

Nonresidential building retreated 12% due to a slower pace by its institutional and manufacturing segments. Residential building dropped 9% with reduced activity for both single family and multifamily housing.

During the first four months of 2018, total construction starts on an unadjusted basis were $223.5 billion, down 7% from the same period of 2017, which included very strong amounts for airport terminals and natural gas pipelines.

On a twelve-month moving total basis, total construction starts for the twelve months ending April 2018 matched the dollar amount that was reported for the twelve months ending April 2017.

April’s data lowered the Dodge Index to 143 (2000=100), down from a revised 165 for March. Taking the average for March and April produces an Index reading of 154, slightly above the 152 average for January and February, although still below the 161 average for the full year 2017.

“The construction start statistics can be volatile on a monthly basis, and given the wide swings present in March and April it’s probably best to take the average of the two months in assessing the current health of the construction industry,” states Robert A. Murray, chief economist for Dodge Data & Analytics.

He explains the average for March and April indicates that construction starts to date in 2018 is proceeding slightly behind 2017’s average pace. Despite the modest slowdown in the early part of the year, there are several factors in the current environment that should help construction activity to stay close to recent levels.

“Job growth continues to be strong, with the unemployment rate at the lowest level since 2000, which should limit any upward movement by commercial vacancy rates this year,” he says.

Among other factors, the Federal Reserve indicated that lending standards for nonresidential building projects eased slightly in the first quarter; and Congress recently agreed on fiscal 2018 appropriations, providing additional funding for several public works programs.

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