Construction Starts Surged in March

If it seems houses and buildings are sprouting out of the ground in record time, it’s because they probably are. New construction starts increased 11 percent in March from February to a seasonally adjusted annual rate of $785.2 billion, according to Dodge Data & Analytics. The impressive growth spurt reverses mild declines in January (down 2 percent) and February (down 3 percent) and ramps up total construction starts to the highest level recorded over the past six months, the company reported.

Residential construction remained stable for single-family homes on a month over month basis. However, multifamily housing pulled down the overall construction for residences 2 percent in March. For the full year though, residential construction grew 7 percent with single-family housing increasing 4 percent and multifamily housing rising 12 percent from the same period last year.

Total construction starts for the first quarter (January to March 2018) on an unadjusted basis totaled $167.3 billion, a 7 percent drop from 2017. Measured on a 12-month moving basis, total construction starts for the 12 months ending this past March were up 1 percent compared with the 12-month period ending in March 2017.

When it comes to the Dodge Index, the March numbers resulted in a 166 reading (2,000 = 100), up from 150 in February. Throughout Q1 2018, the index averaged 157, up 2 percent from the 154 average inked in Q4 2017 but a trifle below the 161 average for full-year 2017.

“This type of data roller-coaster often occurs when construction reaches a mature stage of expansion, trailed by a slower growth rate,” said Robert A. Murray, Chief Economist for Dodge Data & Analytics.  

"Looking at the data on a quarterly basis can reduce the volatility present in the monthly statistics,” he said. “This year's first quarter shows a continuation of the up-and-down pattern that’s been present over the past year—first quarter 2017 up 10 percent, second quarter 2017 down 6 percent, third quarter 2017 up 8 percent, fourth quarter 2017 down 9 percent, and now first-quarter 2018 up 2 percent.”

Slowing expansion doesn’t necessarily make for an imminent decline, and several factors will help construction stick close to recent levels, he notes, including a host of upcoming public works programs, a healthy economy, and moderately rising interest rates.