Construction activity gained in February

At a seasonally adjusted annual rate of $724.3 billion, new construction starts in February advanced 16 percent compared with the previous month, according to Dodge Data & Analytics. 

Residential building also strengthened in February, as growth for multifamily housing outweighed a loss of momentum by single family housing. 

For the first two months of 2015, total construction starts on an unadjusted basis were up 34 percent from the same period a year ago. 

The February statistics produced a reading of 153 for the Dodge Index (2000=100), compared with a revised 132 for January. For 2014 as whole, the Dodge Index averaged 123. "Due to the presence of several unusually large projects, the first two months of 2015 witnessed an especially elevated level of activity that's exceeded the underlying trend for construction starts," said Robert A. Murray, chief economist for Dodge Data & Analytics. "Some pullback can be expected in coming months, since there are only a limited number of LNG-related projects that may reach the construction start stage and petrochemical plants are not likely to match the exceptional amount that was reported last year, particularly with the recent decline in oil prices."

"At the same time, the first two months of 2015 have shown several noteworthy features that point towards the continued expansion for overall construction activity," Murray continued. "For commercial building, both office buildings and hotels are continuing to track upward, supported by the increasing amount of private financing directed at real estate development. For institutional building, school construction is now seeing the benefits of large school construction bond measures that were approved in recent years, while healthcare facilities registered an unexpectedly strong performance in February. For residential building, multifamily housing continues to show brisk development activity in major cities. One area of concern for overall construction activity in 2015 relates to single family housing; will it be able to move beyond the extended plateau that took hold in 2014? Another area of concern relates to public works and specifically highway and bridge construction. Will Congress be able to reach agreement on a new multiyear federal transportation bill by the end of May, or at the very least a continuing resolution that shores up the depleted Highway Trust Fund?"

Nonbuilding construction in February increased 9 percent to $253.8 billion (annual rate), which followed its substantial 92 percent hike in January. Public works construction as a group improved 2 percent in February, with a substantial push coming from highways and bridges, which advanced 12 percent. The environmental public works categories in February were mixed, with river/harbor development up 29 percent, sewer construction up 4 percent, and water supply construction down 3 percent.  The miscellaneous public works category, which had been boosted in January by the start of the $350 million Sun Life Stadium modernization in the Miami FL area, fell 33 percent in February.

Nonresidential building, at $224.9 billion (annual rate), surged 42 percent in February after a relatively weak performance in January. The manufacturing building category was a major contributor, soaring 663 percent in February. The commercial building group grew 19 percent in February, with a varied performance by project type. Hotel construction bounced back 83 percent after a depressed January and office construction climbed 19 percent. Both stores and warehouses registered a slower pace for construction starts in February, with stores down 9 percent and warehouses down 15 percent.

The institutional side of the nonresidential building market rebounded 20 percent in February after a lackluster January. Educational facilities, the largest nonresidential building category by dollar volume, grew 14 percent as it regained the upward momentum that was established in 2014. Healthcare facilities in February jumped 92 percent after a weak January, reflecting the start of these hospital projects, including the $228 million Northwestern Lake Forest Hospital in Lake Forest, Illinois. The smaller institutional categories in February were mixed, with gains reported for transportation terminals, up 27 percent; and public buildings, up 22 percent; while declines were reported for churches, down 26 percent; and amusement-related projects, down 45 percent.

Residential building in February grew 5 percent to $245.7 billion (annual rate), making a partial rebound after an 8 percent decline in January. Multifamily housing registered a strong February, jumping 46 percent.

Single family housing in February slipped back 7 percent, as severe winter weather in the Northeast led to a 24 percent plunge for that region. Single family declines were also reported for the South Atlantic, down 12 percent; the South Central, down 10 percent; and the Midwest, down 1 percent; while the West posted a modest 3 percent gain.

The 34 percent increase for total construction starts on an unadjusted basis during 2015, relative to 2014, was the result of greater activity for all three major construction sectors. Nonbuilding construction year-to-date soared 89 percent, with electric utilities and gas plants up 944 percent while public works retreated 7 percent. Nonresidential building year-to-date increased 22 percent, with manufacturing buildings and institutional buildings each up 26 percent while commercial buildings climbed 15 percent. Residential building year-to-date improved 7 percent, with single family housing up 7 percent and multifamily housing up 9 percent. 

By geography, total construction starts for the January-February period of 2015 revealed this behavior compared to last year – the South Central, up 126 percent; the Northeast, up 12 percent; the South Atlantic, up 9 percent; the West, up 3 percent; and the Midwest, down 5 percent.

Added perspective is obtained by looking at 12-month moving totals, in this case the 12 months ending February 2015 versus the 12 months ending February 2014, which lessens the volatility inherent in comparisons of just two months. On this basis, total construction starts advanced 11 percent. By geography, the 12 months ending February 2015 showed this pattern for total construction starts – the South Central, up 27 percent; the South Atlantic, up 13 percent; the West, up 8 percent; the Northeast, up 3 percent; and the Midwest, up 1 percent.

February 2015 Construction Starts

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