New construction starts in June dropped 15 percent from the previous month to a seasonally adjusted annual rate of $620.2 billion, according to Dodge Data & Analytics. The decline followed an especially strong May, which benefitted from a $9.0 billion liquefied natural gas (LNG) export terminal in Texas being entered as a May start.
During the first six months of 2015, however, total construction starts on an unadjusted basis were reported at $336.0 billion, up 23 percent from the same period a year ago.
By major sector, nonbuilding construction in June fell sharply as the result of a steep pullback by its electric utility and gas plant category, while nonresidential building witnessed a less severe loss of momentum. Residential building in June was able to post a slight gain, helped by the continued strength for multifamily housing.
Highway and bridge construction in June advanced 16 percent.
“Notwithstanding the up-and-down pattern that’s been present on a monthly basis during the first half of 2015, the construction start statistics show that the expansion continues, with a few nuances,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “The 23 percent year-to-date increase for total construction overstates the strength of the expansion, and the underlying rate of growth is likely around 10 percent. The lift to total construction starts in early 2015 by the electric power and gas plant category, namely several huge LNG terminals, will subside as the year proceeds. Public works construction revealed surprising strength during the first half of 2015, but it too is expected to subside given essentially flat federal funding. On the plus side, Congress has moved closer in July to taking the needed steps to shore up the depleted Highway Trust Fund. For nonresidential building, the institutional building segment has maintained the upward track established last year, and manufacturing plant construction has included the start of a few more petrochemical plants. On a mildly cautionary note, the commercial building segment showed some deceleration during the first half of 2015. Continued improvement in real estate market fundamentals should encourage a faster pace for commercial projects going forward. Residential building is seeing more growth for multifamily housing, and single family housing is now edging upward, albeit in a very gradual and hesitant manner.”