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Construction Starts Show Sharp Contraction in April

Total construction starts declined 25 percent from March to April to a seasonally adjusted annual rate of $572.2 billion as COVID-19 and economic recession hit the construction sector, according to Dodge Data & Analytics. In April, residential building dropped 25 percent.

On a year-to-date basis through four months of 2020, total construction starts were 8 percent lower than the same period in 2019. Residential starts were up 2 percent on a year-to-date basis. Looking at starts from a slightly different perspective, total construction starts were 1 percent higher in the 12 months ending in April 2020 than they were for the same period ending in April 2019. Residential building starts were 2 percent higher. The Dodge Index tumbled to 121 (2000=100) in April from the 161 posted in March. This is the lowest reading of the Dodge Index since May 2014.

“The April starts data is definitely sobering, but also very much expected,” says Richard Branch, chief economist for Dodge Data & Analytics. “The near shuttering of the economy during April had a significant negative effect on the construction industry, leading to delays in both ongoing projects as well as those about to break ground. Even though parts of the country are beginning to reopen, and some areas that had paused construction are now restarting, it will be a very long road back to normalcy for the construction industry. Continued fear of a resurgence in the virus will lead to a continued reduction in economic activity over the coming months, affecting construction projects across the country. The economic and construction recoveries will remain sluggish until a vaccine or viable treatment becomes available.”

Nonbuilding construction fell 5% in April to a seasonally adjusted annual rate of $156.6 billion. The utility/gas plant category dropped 52% during the month, but much of that decline was the result of very strong starts in March as several large projects broke ground. Environmental public works also fell in April, losing 3%. On the plus side, the miscellaneous nonbuilding category rose 9% and highway and bridge starts increased 26%. The largest nonbuilding projects to break ground in April were the $673 million I-10 project in San Bernardino CA, the $410 million US Route 101 project in Santa Barbara CA, and a $369 million road resurfacing project in Tallahassee FL.

Residential building starts moved 25 percent lower in April to a seasonally adjusted annual rate of $245.4 billion. Over the month, single family starts dropped 21 percent, while multifamily starts lost 36 percent.

Through the first four months of 2020, residential construction starts were up 2 percent versus the same period of 2019. Single family starts were 8 percent higher, while multifamily starts were down 12 percent through four months. For the twelve months ending in April, total residential starts were 2 percent higher than a year earlier. Single family starts were up 4 percent, while multifamily building starts were down 2 percent.

Read the report here