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Construction Starts Rebound in October
Makes Up for Weak August, September

The Dodge Index, a measure of construction starts nationwide, climbed to 125, up from a reading of 111 in September.

Construction starts rebounded in October after a lackluster August and September, driven mainly by the strength of the residential and non-residential sectors.

Nationwide, starts jumped 13 percent for the month, compared to September, to an annual level of $591.1 billion, according to Dodge Data and Analytics.

The 13 percent improvement helped raise the Dodge Index to 125, from 111 in September. The index was created in 2000 and uses the number 100 as its benchmark.

"The healthy increase for construction starts in October alleviates concern about a stalling expansion that may have arisen with the sluggish activity in August and September," said Robert A. Murray, chief economist for Dodge Data and Analytics.

Residential construction grew 9 percent in October and reached the $260.3 billion mark for the year. Multifamily housing rallied with a 42 percent increase, after a rather less than stellar September. There were only two multifamily projects started in September that were valued at $100 million or more, while there were 11 of these such projects in October.

"For residential building, multifamily housing is still a target for investors, while millennials are lifting the demand for apartments," Murray said.

Single-family housing in October was unchanged from September. Dodge said this sector showed signs of steady progress in early 2015, but has been essentially flat over the last six months.

"For the nonresidential building market, the primary drivers for its commercial and institutional building segments remain positive," Murray said. "The U.S. economy continues to register moderate job growth, vacancy rates are receding, rents are rising, and construction-related bond measures at the state level are getting passed."

Nonresidential starts jumped 32 percent to an annual rate of $200.7 billion, while the commercial building categories as a group soared 49 percent in October.

All of the commercial subsectors put up positive numbers: Store construction was up 56 percent; offices climbed 45 percent; hotels increased 28 percent; warehouses were up 24 percent; and garages and service stations surged 119 percent.

"The construction start statistics do show volatility on a month-to-month basis," Murray said, "and as a result trends in the near term are rarely smooth. On balance, though, factors within the economic and political environment still point toward continued expansion for construction."

Institutional construction, a subcategory of the nonresidential market, climbed 23 percent in October. There are several subgroups of institutional: educational facilities climbed 21 percent; health care was up 18 percent; public buildings increased 25 percent; amusement-related sites improved 17 percent; and churches moved higher by 5 percent. The one category that declined was transportation, and it dropped 5 percent. Manufacturing also retreated in October, shedding 15 percent.

Nonbuilding construction in October dropped 3 percent to an annual rate of $130.2 billion, caused mainly by a 21 percent drop in electric utilities and gas plants. But the public works category in October grew 4 percent, and showed further improvement after a slight 1 percent gain in September.

Source: Dodge Data and Analytics

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May 19, 2019, 8:19 am PDT

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