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January Construction Starts Jump 12 Percent

Dodge Report: Seasonally adjusted annual rate of $690.2 billion

February 23, 2017

After losing momentum during last year’s fourth quarter, nonresidential building strengthened in January, with much of the lift coming from the start of the $3.4 billion Central Terminal Building at LaGuardia Airport in New York NY as well as groundbreaking for several other large airport terminal projects, climbed 12-percent, according to Dodge Data & Analytics.

Nonbuilding construction bounced back from a subdued December, with the boost arising from a $750 million natural gas-fired power plant in Florida plus two pipeline projects – the $900 million Plains Diamond oil pipeline in Arkansas and Oklahoma, and the $767 million Presidio Crossing natural gas pipeline in Texas.

Residential building edged upward in January as the result of a slight gain for single family housing. On an unadjusted basis, total construction starts in January were reported at $48.5 billion, down 3% from the same month a year ago which included especially strong amounts for the often volatile manufacturing plant and electric utility/gas plant categories. If manufacturing plants and electric utilities/gas plants are excluded, total construction starts in January would be up 10% from last year’s corresponding volume.

The January statistics raised the Dodge Index to 146 (2000=100), compared to 130 in December. The Dodge Index reached its 2016 peak in August at 156, and held close to that level in September at 153. The next three months showed the Dodge Index retreating 5% to 6% each month, culminating in December’s 130. For the full year 2016, the Dodge Index averaged 144. “The 12% gain for total construction starts in January gets 2017 off to a healthy beginning, following the declines reported toward the end of 2016,” stated Robert A. Murray, chief economist for Dodge Data & Analytics.

“What’s noteworthy about January’s rebound is that the institutional side of the nonresidential building market, led by airport terminal work, has assumed a more substantial role in keeping the expansion going,” Murray continued.

“The institutional side of nonresidential building has typically lagged the pattern shown by commercial building, and its continued growth is needed for overall nonresidential building to advance further in 2017. While commercial building is also expected to see growth in 2017, its rate of increase will be restrained as vacancy rates level off and banks in the near term maintain a cautious stance towards commercial real estate loans pending any changes to the Dodd-Frank regulations. The public works sector is also anticipated to strengthen in 2017, with help coming from more pipeline work, although Congress needs to finalize fiscal 2017 appropriations which at the moment are set at essentially status quo levels under a continuing resolution that expires at the end of April. The proposal for greater infrastructure spending by the Trump Administration, assuming it gets passed in some form by Congress during this year’s first half, may not have a discernible impact on public works construction starts until the end of 2017 and into 2018.”

To read the full Dodge Data & Analytics report, click here:

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