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News March 22, 2018

February contracts decreased 3 percent

Dodge Data & Analytics, New York, has reported construction starts decreased 3 percent in February. Total construction starts in February were up 2 percent compared with February 2017.

"The 152 average for the Dodge Index during the first two months of 2018 is the same as the 152 average reported for the fourth quarter of 2017, as the pace of construction starts viewed over several months seems to have leveled off," says Robert A. Murray, chief economist for Dodge Data & Analytics. "What's important to keep in mind is that the moderately subdued amount for total construction starts during the first two months of 2018 reflects diminished activity by public works and electric utilities, which, given their inherent volatility, are likely to bounce back over the next month or two. Compared to last year's fourth quarter, the first two months of 2018 have seen further increases for nonresidential building, helped by its institutional building segment, and residential building, helped by multifamily housing. This suggests that the construction expansion, while slowing, is still in progress.

"It's true that the construction industry is now seeing more headwinds," Murray continues. "Material prices have risen over the past year, and the tariffs on steel and aluminum announced by the Trump administration will lead to further price hikes. The Federal Reserve is tightening monetary policy, and concerns about inflation by the financial markets have contributed to rising long-term interest rates. The prospects of an infrastructure program getting passed by Congress this year remain uncertain against the backdrop of a mounting federal budget deficit. At the same time, the economy is expected to get a near-term lift from tax reform, which would benefit commercial and manufacturing building, while funding from recent bond measures will support such institutional project types as school construction. On balance, the rate of growth for total construction is decelerating, but activity for 2018 is expected to stay at a relatively healthy amount."

Nonresidential building construction rose 5 percent in February. In the commercial category, hotel construction jumped 60 percent; office construction grew 24 percent; store construction climbed 6 percent; warehouse construction declined 36 percent; and manufacturing plant construction fell 48 percent. In the institutional category, health care facility construction jumped 52 percent; churches increased 32 percent; educational building construction grew 10 percent; public buildings rose 9 percent; amusement-related construction fell 37 percent; and transportation terminal construction dropped 38 percent.

Residential building construction rose 1 percent in February. Single-family housing fell 1 percent, and multifamily construction increased 7 percent.

Nonbuilding construction decreased 23 percent in February.

During the first two months of 2018, nonresidential building was down 17 percent compared with the same time period in 2017. Residential building increased 10 percent, and nonbuilding construction decreased 21 percent. By geographic region, the Midwest rose 13 percent; South Atlantic was unchanged; South Central decreased 12 percent; West dropped 15 percent; and Northeast fell 17 percent.

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