non-building sectors post significant early summer gains, says report

Although total construction starts increased 6 percent from May to June of this year at a seasonably adjusted annual rate, the real gain was in the non-building sector, according to a new survey conducted by Dodge Data & Analytics.

That sector, which includes engineering and architectural firms, as well as joint venture contractors, saw a 27 percent gain early this summer with a total dollar value of $191 billion.

Meanwhile, says Dodge of the overall increase in construction projects: “This marks the second consecutive monthly gain in construction starts following the Covid-19 induced decline in March and April.”

But while those starts are on the upside, they were still off by 14 percent from the first six months of 2019.

Construction starts are regarded as a key economic indicator and represent the number of new projects begun during a given month.

The pattern of the starts early this summer varied greatly depending upon the industry. Highway and bridge construction starts were up by 8 percent, while environmental and the miscellaneous non-building sectors were each off by 20 percent.

Also down: utilities and gas plant projects by 40 percent, institutional building by 15 percent, and manufacturing starts by 38 percent.

Looking at all of the numbers, Richard Branch, chief economist for Dodge, said, “Construction starts activity remains significantly weaker than year-ago levels, even though it has been slowly increasing since its nadir in April.”

The economist also pointed out that while gains in May were fueled by a handful of very large projects, the gains in June appear to be “much more organic in nature.”

Continued Branch: “Construction starts should continue to post modest gains in the months to come as the economy continues to recover from the shortest and steepest recession in U.S. history.”
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But Branch also warned that an acceleration in new Covid-19 cases still presents a “significant downside risk to the economy and the construction industry’s growth trajectory.”

​By Garry Boulard

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