Dive Brief:
- Production starts, which had been a rock-solid area of stability for home builders until this point this year, fell 68% in April. According to Dodge Construction Network, the plunge caused overall building and construction kickoffs to decline by 4% for the month to a seasonally adjusted annual rate of $1.04 trillion.
- Despite the normal monthly decline, nonresidential structure starts—a category that includes production—were still up 7% year to year through April. Compared to the same period last year, nonbuilding starts—which include construction of roads, dams, and power plants—grew by 16%, whereas residential starts fell by 27%.
- A silver lining to April’s downturn was the longer-term impetus for nonresidential building and construction. According to Richard Branch, the principal financial specialist for Dodge Construction Network, “the underlying patterns indicate an extremely healthy sector, although the existence, or lack thereof, of big production jobs monthly has actually made the information more unpredictable.” Even in the face of inflation, unstable banking, and the potential violation of the U.S. financial obligation ceiling, the construction industry continues to brush its financial worries under the rug.
Dive Insight:
The decline comes in response to Branch’s warning from last month that prices were “likely to degrade from their prior highs, and in most cases, that is starting to play out on a regular monthly basis.”
Branch came to the conclusion that the building and construction industry’s continued strength might only be temporary based on the combined regular monthly bag across multiple sectors in April.According to him, the decline in the Dodge Momentum Index, which monitors jobs in the early stages of preparation, “need to result in weaker starts in the second half of the year — specifically for the economic sector.”
Nonresidential structure
- In April, nonresidential structure starts fell by 22% to a seasonally adjusted annual pace of $383 billion, mostly as a result of the substantial decline in building construction. According to the report, year-to-date production starts were still up 4% from the first four months of 2022.
April saw an increase of 5% in industrial starts, which include retail, storage facilities, workplaces, garages, and hotels. Due to a decline in health care building and construction activity, institutional starts, which include schools and health centres, fell 13%.
The largest non-residential structure projects that started in April included:
the Cartersville, Georgia-based Hanwha Qcells solar plant manufacturing, worth $1.2 billion.
- the Moses Lake, Washington, Group14 battery factory, worth $650 million.
- Omaha, Nebraska’s $600 million Mutual of Omaha headquarters.
Residential structure
Domestic construction starts increased 12% in April to a seasonally adjusted annual rate of $373 billion, while being down 27% year to date. According to the data, growth in single-family and multifamily starts increased for the month by 14% and 10%, respectively. The largest multifamily buildings that opened in April included:
- The Honolulu, Hawaii’s $549 million Mana’olana Place mixed-use building
- a mixed-use building in Flushing, New York, worth $500 million.
- the Santa Monica, California, 710 Broadway Apartment, worth $385 million.
Nonbuilding building and construction
- Building and construction projects other than buildings, such as facilities projects, increased 7% in April to a seasonally adjusted rate of $281 billion. According to the study, the category for electricity and gas plants increased 76% in the month while that for roadway and bridge construction increased 5%.
The largest non-building projects that started in April included:
the Louisianan town of Plaquemine’s $750 million Magnolia Power Kindle Energy production facility.
Wyoming’s Rock Creek Wind Farm, worth $738 million.
Jacksonville, Florida’s $542 million Eagle LNG export facility.
Cloudy projections ahead
In April, when it lost 5.1%, Dodge’s Momentum Index, which assesses the readiness of nonresidential structures, fell for the second consecutive month.Typically, the index is 12 months ahead of actual building and construction activity expenses.
According to Sarah Martin, associate director of forecasting for Dodge Construction Network, the decline came after a larger 8.6% decline in March, which was mostly caused by tighter loaning criteria.
Branch predicted this month that beginnings are expected to lose steam as the year progresses, especially as the unpredictability of the bank market begins to permeate the news.