Construction Starts Dipped 18% in September

Hamilton Township, NJ, November 5, 2020-Total construction starts dipped 18% in September to a seasonally adjusted annual rate of $667.7 billion, essentially taking back August’s gain, according to Dodge Data. While some of this decline is certainly payback from several large projects entering start in August, the drop in activity brought total construction starts below levels seen in June and July. Nonresidential starts fell 24%, while residential building dropped 21% over the month. Nonbuilding starts were 5% lower than August.

Year-to-date through nine months, total construction starts were down 14% from the same period in 2019. Nonresidential starts were lower by 26% and nonbuilding was down 18%, while residential starts gained 1%. For the 12 months ending September 2020, total construction starts were down 8% from the 12 months ending September 2019. Nonresidential building starts were 19% lower and nonbuilding starts were 11% lower, while residential building starts rose 4% over the 12 months ending September 2020. In September, the Dodge Index fell 18% to 141 (2000=100) from the 173 reading in August. September’s Dodge Index was down 23% compared to a year earlier and 21% lower than its pre-pandemic level in February.

“That construction starts took a significant step back in September is disappointing, but also not surprising,” stated Richard Branch, chief economist for Dodge Data & Analytics. “The economic recovery has lost momentum and is showing strain since support provided to consumers and businesses from expanded unemployment insurance benefits and the Paycheck Protection Program have expired. The worsening budget crisis for state and local areas has also slowed growth in public project starts, particularly in the face of a somewhat uncertain outlook for federal infrastructure spending programs. The road to recovery will continue to be uneven and fraught with potholes until a vaccine is developed and widely adopted across the U.S.”

Nonbuilding construction fell 5% in September to a seasonally adjusted annual rate of $176.3 billion. Highway and bridge starts rose for the third consecutive month, jumping 10%, while utility/gas plant starts moved up 21%. However, environmental public works and miscellaneous nonbuilding starts each lost 26% over the month.

Residential building starts lost 21% in September, falling to a seasonally adjusted annual rate of $314.0 billion. Single family starts dropped 6% in the month as multifamily starts tumbled 54%.