Some Nonresidential Construction Growth Is Faltering

Published On
Aug 28, 2018

According to the latest report from Dodge Data & Analytics, July construction starts dropped a total of 9 percent to a seasonally adjusted rate of $817.4 billion. This is following an increase in May of 14 percent and an increase in June of 11 percent. The contraction in July caused the Dodge Momentum Index to drop from 190 in June to 173 in July.

While the rate of residential and nonbuilding starts remained relatively stable in July, nonresidential starts dropped—a total of 22 percent to an annual rate of $318 billion. This drop is particularly noteworthy, given nonresidential starts increased 59 percent in June.

The report notes that, despite the changes in values in recent months, starts from January through July 2018 were up a total of 2 percent compared to the same period in 2017.

Courtesy of Dodge Data & Analytics
Courtesy of Dodge Data & Analytics

How are the nonresidential starts faring in each category? The healthcare facility category dropped 35 percent from June to July, the office building category dropped 23 percent, the educational category dropped 12 percent, and the warehouse category dropped just 1 percent.

There was some growth in nonresidential construction, however. The largest of these was the hotel category, which increased 37 percent, followed by the transportation terminal category, which increased 28 percent.

Despite the drops in certain categories, as well as the challenges faced by the industry in general related to increasing material prices and interest rates, the overall outlook remains positive, according to Dodge Data & Analytics, given the continued healthy economy, the additional availability of money for public works projects, and some loosening of lending restrictions.

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