November new construction starts slide downward
Dodge Data & Analytics reports at a seasonally adjusted annual rate of $650.5 billion, new construction starts in November dropped 12% from October levels.
Nonresidential building, Dodge says, fell 14% in November, retreating for the second month in a row after the sharp improvement reported in late summer.
The non-building construction sector, which can be volatile on a month-to-month basis, plunged 32% in November after its 28% hike in October, which included the start of two large natural gas pipeline projects, Dodge reports. Meanwhile, residential building managed to edge up 1% in November, as an improved amount for single-family housing slightly outweighed a moderate pullback for multifamily housing.
Dodge says during the first 11 months of 2017, total construction starts on an unadjusted basis were $687.1 billion, up 1% from a year ago. The year-to-date increase for total construction was restrained by a 39% downturn for the electric utility/gas plant category. Excluding electric utilities and gas plants, total construction starts during the first 11 months of 2017 would be up 4% compared to last year.
November’s data lowered the Dodge Index to 138 (2000=100), down from 157 for October and this year’s high of 173 for September, which reflected the boost coming from several unusually large projects – a $6.0 billion ethane cracker plant in Pennsylvania, the $4.0 billion Delta Airlines new terminal facility at LaGuardia Airport in New York NY, and the $1.7 billion 50 Hudson Yards office tower in New York NY.
“While total construction starts fell considerably during October and November, the declines came after an exceptionally strong September,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “If one takes the average of September, October and November, total construction starts during that period would be down only 1% from the average of the previous eight months. On balance, the construction expansion has continued during 2017, although it’s true the rate of growth has slowed from the 6% gain reported for 2016 as well as the 11% to 13% yearly gains reported from 2012 through 2015.”
“Several features stand out about the pattern of construction starts during 2017,” Murray continued. “For nonresidential building, the upward momentum has shifted from commercial building to institutional building, and the manufacturing building category is no longer exerting a downward pull.
“For residential building, growth is being reported for the single-family side of the market, while multifamily housing appears to have peaked and is now retreating moderately. For non-building construction, public works has been lifted this year by an especially strong amount of pipeline starts, while highway and bridge construction has been steady and environmental public works has weakened. A further retreat by electric utilities and gas plants continues to depress the non-building total.
“Heading into 2018, it’s expected total construction activity will register modest growth next year, and the passage of tax reform will play some role in shaping the pattern of activity. Assuming economic growth is boosted by the corporate tax cuts, the likely beneficiaries would be commercial building and multifamily housing, although there’s also concern that more limited deductions for state and local taxes could dampen some of the growth expected for single-family housing. The fact that private-activity bonds retained their tax-exempt status in the final tax reform legislation is viewed as a plus for institutional building and public works.”