CMD: August nonresidential construction starts plunge 24.7%

Dive Brief:

August nonresidential construction starts declined 24.7% in comparison with July, according to CMD Group’s September 2015 "Construction Industry Snapshot," with the category of heavy engineering showing the greatest change at -62.1% — a dive resulting from decreases in its two major components, road/highway (-63.4%) and water/sewage (-51.3%).
CMD attributes part of the August decline to a significant, upward adjustment in July’s figure from $22.4 billion to $26.3 billion, primarily in the warehouse, hospital/clinic and road/highway categories.
Commercial and institutional subcategories showed negligible movement, at -1% and 2% respectively, while the -73.9% change in the industrial subcategory, according to the report, can most likely be explained by the relatively low-dollar volume of industrial and the impact of its sporadic megaprojects. And for the first time since 2013, month-to-month employment in architectural and engineering services declined -0.3%, although year-over-year performance stayed strong at 3%.

Dive Insight:

August's drop in nonresidential construction spending continues the fall seen in July. And while construction added 3,000 jobs in August, that number was lower than the addition of 7,000 jobs reported in July.

Perhaps one of the most sobering aspects of the August CMD report, in the wake of disappointing architectural and engineering services employment numbers, is the departure from the optimism of CMD's July 2015 report, in which the author struck a hopeful tone regarding the possibility of this sector catching up to its pre-recession peak over the next few months.

However, on a more positive note, in what at first sounds like discouraging results, the industrial subcategory’s -73.9% change between July and August is quickly overshadowed by its year-to-date increase of 46.6%.

In addition, the retail component buoyed the commercial subcategory with a month-over-month increase of 35.4% and year-over-year rise of 12.5%, helping to counterbalance the downward trend, year-over-year and year-to-date, of private office buildings.