Construction starts fall again

Dive Brief:

Total construction starts declined 19% in September to a seasonally adjusted annual rate of $1.02 trillion, according to a Dodge Data & Analytics report.
The September decline follows August’s 9% drop in total construction starts, marking two consecutive months of decline following July’s 48% surge. Nonresidential building starts dropped 23%, residential starts fell 11% and nonbuilding starts, such as roads, bridges and power plants, dipped 25%.
Nevertheless, the drop in starts should not be considered a sign of a pending pullback in the construction industry, said Richard Branch, Dodge chief economist, in the report.

Dive Insight:

Total construction starts posted 16% gains in the first nine months of 2022 compared to the same period of 2021. During that same span, nonresidential building and nonbuilding starts jumped 37% and 20%, respectively, while residential building starts remained flat.

For the 12 months ending September 2022, total construction starts were 15% above the 12 months ending September 2021. Nonresidential starts were 34% higher, residential starts gained 2% and nonbuilding starts were up 17%, according to the report.

For that reason, Branch said the decline over the past two months should be understood in a broader context.

“September’s decline in construction starts should not be seen as a precursor to a cyclical pullback in the industry,” said Branch. “The previous two months saw the start of several megaprojects, and the decline in September returns starts activity to its trend level.”

But as interest rates move higher in the coming months, marginal construction projects may not get underway and construction activity will begin to settle back, added Branch.

Nonbuilding construction starts fell 25% in September to a seasonally adjusted annual rate of $213.1 billion. The largest nonbuilding projects to break ground in September were the:

$302 million Sunflower Wind Farm in Fairplay, Kansas.
$267 million Orinda waste treatment plant in Oakland, California.
$246 million Cattlemen Solar Park in Milam County, Texas.

Nonresidential building starts dropped 23% in September to a seasonally adjusted annual rate of $438.8 billion. The largest nonresidential building projects to break ground in September were the: