At a seasonally adjusted annual rate of $783.6 billion, new construction starts in May advanced 15% from April, Dodge Data & Analytics reported Wednesday.
The increase follows a 12% decline in April, and shows total construction activity reaching the highest level reported over the past eight months.
The lift in May came from substantial gains for non-building construction, up 39%; and nonresidential building, up 18%; as both sectors benefited from the start of several very large projects.
Non-building construction, and specifically its public works segment, was boosted by the start of three large natural gas pipelines with a combined construction start cost of $4.6 billion, plus $1.4 billion related to the start of an environmental cleanup project at the Los Alamos National Laboratory in New Mexico, a $1.4 billion rail transit project in Los Angeles CA, and a $1.1 billion rail transit project in the Boston MA. area.
Nonresidential building was aided by the start of a $1.0 billion Facebook data center in Nebraska, the $764 million expansion to the Washington State Convention Center in Seattle WA, and a $740 million airport terminal project at Salt Lake City International Airport.
Meanwhile, residential building in May held steady with its April pace. Through the first five months of 2018, total construction starts on an unadjusted basis were $299.9 billion, down 3% from the same period a year ago. On a twelve-month moving total basis, total construction starts for the twelve months ending May 2018 were up 1% from the amount reported for the twelve months ending May 2017.
The May statistics raised the Dodge Index to 166 (2000=100), compared to April's reading of 144 (upwardly revised from the initially reported 143).
"During the first five months of 2018, total construction starts have shown an up-and-down pattern, with May coming in strong after a subdued April," stated Robert A. Murray, chief economist for Dodge Data & Analytics. "Much of the volatility in early 2018 has come from the public works sector, affected by the presence of unusually large project starts during a given month such as what took place in May. In addition, the nonresidential building sector showed resilience in May, bouncing back after a lackluster performance in April."
"On balance, the pace of total construction starts is staying close to the levels achieved over the past year, when activity grew 5%," Murray continued. "It's true that the construction industry is facing increased headwinds, such as higher material prices and the recent pickup in interest rates, but to this point they have not yet produced a discernible negative impact on the overall level of construction starts."
Nonbuilding construction in May was $222.1 billion (annual rate), rebounding 39% after sliding 23% in April. The public works project types as a group surged 47%, boosted by a 169% jump by the miscellaneous public works category that includes pipelines, rail transit, and site work. There were three substantial natural gas pipeline projects entered as construction starts in May – the $2.1 billion Mountaineer Xpress Pipeline in West Virginia, the $1.9 billion Gulf Coast Express Pipeline in Texas, and the $600 million Gulf Xpress Project that involves new compressor stations in Kentucky, Tennessee, and Mississippi. During the first five months of 2018, the dollar amount of pipeline projects entered as construction starts was $12.0 billion, only slightly below the exceptional $14.5 billion reported during last year's first five months. In addition, there were two substantial rail transit projects entered as construction starts in May – the $1.4 billion Westside Purple Line Extension (section 2) in Los Angeles CA and the $1.1 billion Green Line Extension in Somerville MA. During the first five months of 2018, the dollar amount of rail transit projects entered as construction starts was $5.0 billion, more than three times the $1.6 billion reported during last year's first five months. The sewer and hazardous waste category soared 196% in May, reflecting $1.4 billion related to the start of environmental cleanup work at the Los Alamos National Laboratory in New Mexico that will span up to ten years. Water supply construction and river/harbor development registered similar gains in May, rising 25% and 22% respectively, with the latter helped by the start of a $310 million flood mitigation project in Brooklyn NY. Highway and bridge construction was the one public works project type to recede in May, dropping 26% as it continues to retreat after very strong activity in March. Through the first five months of 2018, highway and bridge construction starts were still up 4% compared to last year. The electric utility/gas plant category dropped 24% in May, although the latest month did include the start of a $325 million wind farm in Illinois and a $250 million transmission line project in Missouri.
Residential building in May was $312.8 billion (annual rate), essentially unchanged from its April amount. Multifamily housing in May made a partial 13% rebound after a 20% decline in April. There were six multifamily projects valued each at $100 million or more that reached groundbreaking in May, compared to four such projects in April. Leading the way was the $173 million multifamily portion of a $200 million mixed-use high-rise in Oakland CA, $162 million for two residential towers in Bethesda MD, and $155 million for the multifamily portion of a $190 million mixed-use complex in the San Jose CA area. In May, the top five metropolitan areas ranked by the dollar amount of multifamily starts were – New York NY, Washington DC, San Francisco CA, Miami FL, and Dallas-Ft. Worth TX. Metropolitan areas ranked 6 through 10 were – Boston MA, Seattle WA, Orlando FL, Los Angeles CA, and Atlanta GA. Single family housing in May retreated 4% from the previous month, as the continued expansion for this project type struggles to take hold in early 2018. By geography, single family housing showed this pattern in May relative to April – the South Central, down 8%; the West and South Atlantic, each down 6%; and the Midwest and Northeast, each up 5%.
