ConDig (21-Aug-18).  U.S. construction starts dropped 9% in July from the month prior to a seasonally adjusted annual rate of $817.4 billion, according to latest figures from Dodge Data & Analytics.

It comes as nonresidential building nosedived 22% after surging 59% in June, which had been lifted by the start of two large-scale manufacturing plants and two massive office buildings.

But the residential building sector was up 2% and nonbuilding construction unchanged.

Despite the drop in July, total construction starts for the first seven months of this year on an unadjusted basis were $471.4 billion, up 2% from the same period a year ago.

“The pattern of construction starts on a monthly basis is often affected by the presence or absence of very large projects, and several exceptionally large projects boosted activity in June to an unsustainably high amount,” said Robert A. Murray, chief economist for Dodge Data & Analytics.

He added that June projects included a $6.5 billion uranium processing plant in Tennessee and a $1.7 billion petrochemical plant in Texas, as well as the $1.8 billion Spiral office tower in New York NY and a $665 million office tower in Chicago IL.

For July, several large projects were booked such as a $2.4 billion petrochemical plant in Texas and a $750 million data center in Alabama.
The 2% rise in starts for the year-to-date comes despite a deepening skills shortage across the construction industry and high material costs.

Leaders of the construction industry continue to warn about the rise in material costs, which has been exacerbated follow a decision by President Trump to slap a 25% tariff on imported steel and a 10% duty on foreign aluminum from Canada, Mexico and the European Union on May 31.

“The current year has seen the mounting headwinds of higher material prices and higher interest rates, but it’s also seen the tailwinds of healthy economic growth, some easing of bank lending standards, and the increased funding for public works programs coming from the federal appropriations legislation passed in March. Amidst the monthly ups-and-downs, the broad trend for construction starts during 2018 remains one of modest expansion,” said Murray.