According to the Dodge Construction Network (DCN), total construction starts surged 48% in July to a seasonally adjusted annual rate of $1.36 trillion. The gain is due to the start of three large manufacturing plants and two Liquefied Natural Gas (LNG) export facilities. Even without these projects, however, total construction starts would still have increased by 7%. Nonresidential building starts rose 79% last month, and nonbuilding starts jumped 120%. On the other hand, residential starts decreased by 8%.
Year-to-date, total construction is 11% higher through July 2022 compared to the same period in 2021. Nonresidential building starts rose 22% over the year, residential starts gained 1%, and nonbuilding starts were up 16%.
DCN reports, "for the 12 months ending July 2022, total construction starts were 10% higher than the amount during the 12 months ending July 2021. Nonresidential starts were 21% higher, residential starts gained 4%, and nonbuilding starts gained 10%."
According to Dodge Construction Network's chief economist, Richard Branch, "Mega-projects aside, construction continues to improve despite the pressure created by higher interest rates and labor scarcity. Combined with the strong labor market, this is another indicator that the U.S. is not currently in a recession." Branch notes, "the Federal Reserve will continue to aggressively raise interest rates until they feel that inflation is under control. This will create mounting pressure on building activity and potentially lead to a slowdown in construction starts by year-end."
The massive rise in nonbuilding construction starting in July is attributed to the utility/gas sector, as two multi-billion-dollar LNG export plants broke ground. Even without these projects, nonbuilding starts would have risen 29% due to gains in miscellaneous nonbuilding starts, environmental public works, and highway and bridge start. Through the first seven months of 2022, utility/gas plant profits gained 63%, highway and bridge starts increased by 16%, and environmental public works were 2% higher than in 2021. Miscellaneous nonbuilding starts were, however, down 20% during this period. For the year ending July 2022, utility/gas plant starts were 44% higher, highway and bridge starts rose 7%, and environmental public works increased by 4% compared to the year ending July 2021. Miscellaneous nonbuilding starts decreased by 18%.
Graphic courtesy of Dodge Construction Network
Manufacturing was the main driver of growth in the nonresidential building sector with the breaking ground of four projects. Similar to nonbuilding construction starts, the sector would have seen gains without these projects. Institutional starts rose 28% in July due to gains in healthcare starts, while commercial starts fell by 11%. Through July 2022, commercial starts were 13% higher, institutional starts rose 2%, and manufacturing starts saw a huge 185% increase compared to the same period in 2021. For the year ending July 2022, commercial starts grew 13%, institutional starts rose 6%, and manufacturing starts jumped 170% on a 12-month rolling sum basis.
In the residential building sector, single family starts fell 9% and multifamily starts decreased 5%. Through July 2022, multifamily starts were up 24%, while single family housing fell 7%, compared to the same timeframe in 2021. For the 12 months ending July 2022, single family starts were 4% lower and multifamily starts gained 26% on a 12-month rolling sum basis.
In all regions except the West, total construction starts in the month of July rose.
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