Construction Saw Modest Wins, Some Losses in April

Image by Karuvadgraphy from Pixabay
Published On
May 26, 2022

According to a May 2022 report from Dodge, total construction starts in April were 3% higher than in March, rising to a seasonally adjusted annual rate of $945.8 billion. These modest gains offer a mixed bag, however, with starts in some sectors rising and others falling.

Nonresidential starts had the strongest gains, rising a modest 6%. Manufacturing has seen significant gains in particular, with a 16% increase from March and a whopping 189% increase year-to-date.

The backlog for nonresidential building may be filling, however, indicating we may be seeing stronger increases in this sector early next year. The April 2022 Dodge Momentum Index[BC1]  (released in May 2022) moved up by 6% to a reading of 164.8 from a reading of 155.0 in March. This monthly index is a measure of the first reports of nonresidential building projects entering the planning queue. These initial reports are indicative of upcoming nonresidential construction spending, generally leading spending by a full year.

Year-over-year, the April 2022 Momentum Index is 17% higher than April 2021, and it is just 5% lower than the all-time high reading in fall of 2021. The main driving force is the commercial sector—specifically data centers, warehouses and hotels—which rose 9%.

Residential starts had a smaller increase of just 4% from March. Dodge reported than single-family starts increased just 1% (but have dropped 2% year-to-date), while multifamily rose 13%.

The NAHB also reported that the residential sector shows signs of slowing, with a 0.2% drop in the number of residential starts in April. Single-family starts declined 7.3%, while multifamily starts rose by 15.3%. According to the NAHB, rising mortgage rates and ongoing supply chain disruptions continue to raise housing costs and stymie growth in this sector.

Robert Dietz, the NAHB’s chief economist, remarked that this report “is more evidence that the single-family market is slowing. While single-family starts are up 4.1% on a year-to-date basis, we’re expecting flat conditions for the year and a decline in 2023 as housing affordability challenges in the form of higher mortgage rates and construction costs continues to worsen housing affordability conditions. Single-family permits are down 2.3% on a year-to-date basis thus far in 2022.”

Meanwhile, nonbuilding starts fell by 4% overall, although gains and losses were extremely mixed for the different types of projects in this category. For example, utility and gas plant starts rose by 10% and environmental public works rose 8%, while highway and bridge starts dropped 14%. From April 2021 to April 2022, nonbuilding was relatively even, with a drop of only 1%.

Stay tuned for a more detailed look at the construction market in the Midyear Construction Outlook in the July 2022 issue of ELECTRICAL CONTRACTOR.

Stay Informed Join our Newsletter

Having trouble finding time to sit down with the latest issue of
ELECTRICAL CONTRACTOR? Don't worry, we'll come to you.