August Construction Starts Drop

Though new construction starts were down in August, experts still predict an overall expansion for 2015.

August Construction Starts Drop Builders, lenders, and other companies involved in the construction industry tend to monitor new construction starts almost religiously in an effort to gauge the health of this sector and predict the future of their business. Of course this is a tricky endeavor, especially when the trends indicated by month-to-month and year-over-year statistics differ.

Deep Declines in August

This past month, new construction starts stumbled in a variety of sectors. The biggest decline was seen in hotels and office buildings. Hotel starts declined 35 percent with office projects nearly matching them with 34 percent decline. Overall, nonresidential building starts dropped 16 percent to a $160.7 billion rate.

Multifamily housing starts also took a big hit, decreasing 23 percent compared to July. Residential construction starts as a whole dropped 8 percent to a $265.5 billion rate.

Despite the recent approval of $8 billion for the Highway Trust Fund, road and bridge construction also declined in August, showing a decrease of 15 percent compared to July.

Putting It In Context

Taken on their own, these decreases in new construction starts for August are disheartening. However, the chief economist of Dodge Data & Analytics, Robert Murray, reminds us to see these “subdued” stats in context of the entire year. It is not at all uncommon for construction starts to show what he calls an “up and down pattern” when compared month to month, so for a better understanding of the overall trend it is necessary to look at a longer time frame.

The numbers for 2015 as a whole do look better than the numbers for August alone, showing what Murray characterized as “an expansion that’s still proceeding.”

All regions of the country have recorded increases in new construction starts for the year to date, with the South Central area and the Northeast leading the pack with a 31 percent increase and a 20 percent increase respectively. The smallest increase, a modest 4 percent, came from the Midwest.

Overall, residential starts have increased 8 percent since this time last year, and non-building work (led by electric utility and gas plant projects) has jumped 43 percent. Nonresidential declined 5 percent over 2014.

Are You Positioned to Grow Your Construction Business?

Of course, construction growth rates won’t really matter much to you if your business isn’t positioned to win and complete jobs efficiently. Switching to ECL Software’s CMIS suite can help. This software was designed by construction professionals for construction professionals and contains all the tools you need to produce and revise professional bids and then stay organized, on schedule, and on budget during a project.