Construction Starts Lose Ground in July

August 18th, 2020 | Category: Industry News

Total construction starts fell 7% in July to a seasonally adjusted annual rate of $631.6 billion. The decline was due to a significant pullback in the nonbuilding segment, which fell 31% from June to July. Nonresidential building starts rose 3% while residential building starts increased 2%.

Year-to-date through seven months, starts were down 15% from the same period in 2019. Nonresidential starts plummeted 25%, nonbuilding starts dropped 20% and residential starts slipped 4%. For the 12 months ending July 2020, total construction starts fell a more modest 5% from the same period a year earlier. Nonresidential building starts were 11% lower, while residential building starts rose 1%. Nonbuilding starts fell in between, with a 7% drop over the 12 months ending July 2020.

“The July decline in construction starts should not be interpreted as a setback on the sector’s road to recovery,” says Richard Branch, chief economist for Dodge Data & Analytics. “The gains in the nonresidential and residential sectors mirror the general overall improvements in the economy. The drop in public works could represent a settling back in activity following a solid spring in which some projects broke ground earlier than expected to take advantage of the fewer cars on the road during the COVID-19 shutdown in March and April. While the recovery progresses, the congressional impasse preventing the extension of enhanced unemployment insurance benefits and small business loans included in earlier fiscal support packages casts a pallor over the future trajectory for growth. Furthermore, the gain in nonresidential building starts was entirely due to strength in the Northeast and West regions, with starts in the South Atlantic and South Central regions down sharply during the month. While one month doesn’t constitute a trend, the potential risk to construction from the rising number of COVID-19 cases in these regions is significant.”

Nonresidential building starts increased 3% in July to a seasonally adjusted annual rate of $202.6 billion. Commercial starts gained 13% led by gains in hotels, warehouses and office buildings. Institutional starts rose 2% due to an increase in education activity, while manufacturing starts lost 52% during the month.

The largest nonresidential building project to break ground in July was the $400 million Mickey Leland International Terminal at George Bush Intercontinental Airport in Houston. Also starting were the $377 million Hyatt Regency Hotel at the Salt Lake Convention Center in Salt Lake City and a $337 million renovation of a terminal building at Los Angeles International Airport.

Year-to-date, total nonresidential building starts were 25% lower in the first seven months of 2020. Institutional building starts were down 16%, while commercial starts were 32% lower and manufacturing starts were down 52% on a year-to-date basis. For the 12 months ending July 2020, total nonresidential building starts dropped 11% from the 12 months ending in July 2019. Commercial starts were 12% lower, while institutional starts were down 10%. Manufacturing starts dropped 4% on a 12-month rolling basis.

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