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Economic Watch: New Construction Jumps 13 Percent

December 19, 2014

By Evan Lockridge

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The Dodge Index of new construction starts. Graphic: Dodge Data & Analytics
The Dodge Index of new construction starts. Graphic: Dodge Data & Analytics

New construction starts in the U.S. climbed 13% in November from the month before to an annual rate of $677.8 billion, according to industry data provider Dodge Data & Analytics. 

Nonresidential building had a particularly strong month while residential building retreated in November, as multifamily housing settled back from its brisk pace in October.

For the first eleven months of 2014, new construction starts increased 7% from the same time last year, totaling $530.8 billion. The hike at the national level during the first eleven months of 2014 showed gains for all five major regions, to varying degrees: the South Central, up 15%; the South Atlantic, up 10%; the West, up 6%; the Northeast, up 2%; and the Midwest, up 1%.

The November statistics raised the Dodge Index to 143, up from a revised 127 for October and marking the strongest month so far in 2014. 

"After the sluggish activity witnessed at the outset of 2014, new construction starts have generally strengthened, showing an up-and-down pattern around a rising trend, with November coming in especially strong," said Robert A. Murray, chief economist for Dodge Data & Analytics. "While residential building has decelerated in 2014, due to the pause by single family housing, the nonresidential building sector has assumed the leading role in keeping the construction expansion going.”

Nonresidential building in November soared 32% to an annual rate of $256.7 billion. A substantial boost came from a 253% increase for the manufacturing plant category, maintaining the often volatile behavior that's been present this year, according to Dodge. During the first eleven months of 2014, nonresidential building climbed 17% compared to the same time a year ago. 

Nonbuilding construction advanced 22% to an annual rate of $182.6 billion in November. The electric power and gas plant category provided most of the lift, jumping 363% Highway and bridge construction dropped 7%. For the January through November period nonbuilding construction decreased 4% from a year ago. 

Residential building in November fell 6% to an annual rate of $238.5 billion. Multifamily housing retreated after its strong October performance, sliding 21% Single family housing in November edged up a slight 1%, essentially holding steady with the flat activity that's been present since the end of last year.

"While there are signs that the banking sector is beginning to improve access to home mortgages, as shown by lending survey results, there has yet to be a discernible positive impact on single family homebuilding,” said Murray.

During the first eleven months of 2014, residential building grew 7% compared to a year ago, a much smaller increase than the 26% gain reported for all of 2013. Single family housing was up only 2% year-to-date while multifamily housing revealed a much stronger year-to-date performance, climbing 25%. 

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