Construction Starts Rose 17% in July But Also Hit a Plateau for the Year

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Total construction starts grew 17 percent in July, but yearlong trends remain stagnant as monthly construction levels plateau, according to Dodge Construction Network data.

The report — which covers every construction project that broke ground last month — found that July’s boost in construction starts to a seasonally adjusted rate of $1.2 trillion was largely due to one project: A $12 billion liquefied natural gas facility in Brownsville, Texas, which increased the start rate for nonbuilding structures by 38 percent.

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Without the natural gas facility, nonbuilding starts would have dropped 7 percent and impacted the overall construction starts for July, according to the report. Meanwhile, July saw a 6 percent decrease in nonresidential starts and a 6 percent increase in residential starts.

And while the total construction starts may have increased last month, construction starts are down 7 percent year-to-date, compared to this time last year. Further, they’ve started to plateau, according to the report.

The $1.2 trillion average monthly level for construction starts has not moved up or down since last summer, thanks in large part to higher interest rates, labor shortages and the price of materials, Richard Branch, chief economist for Dodge, said in the report. 

And, things could get worse. Nonresidential construction starts fell 6 percent in July, and they’re expected to continue the downward slope due to a lack of building projects entering the planning stage, Branch said. 

However, this could be balanced by a rise in infrastructure starts, which is expected to see a boom thanks to the $550 billion earmarked for federal infrastructure projects as part of President Biden’s Infrastructure Investment and Jobs Act, according to the report.

Publicly funded markets like infrastructure, manufacturing, and lab projects are all faring well. The uptick comes as manufacturers put forth an effort to reshore manufacturing on U.S. soil after COVID-19-related supply chain issues in 2020 and 2021, the Charlotte Observer reported.

The residential market has also been a bright spot with overall construction starts rising 20 percent in July, according to the report. Single-family construction starts gained 2 percent and multifamily grew by a whopping 62 percent last month.

But single-family and multifamily starts were still down by 21 percent year-to-date as higher interest rates led to climbing mortgage rates.

Outside the residential sector, commercial construction rose 11 percent, largely due to starts in warehouse and parking projects, as hotel and office construction continue to lag.