Total construction starts rose 6 percent in August to a seasonally adjusted annual rate of $1.3 trillion, according to Dodge Construction Network. Nonresidential starts rose 4 percent as a result of a large pickup in manufacturing and transportation buildings. Residential and nonbuilding starts fell 1 percent and 14 percent, respectively.
Year-to-date through August 2023, total construction starts were 5 percent below that of 2022. Residential and nonresidential starts were down 18 percent and 9 percent, respectively; however, nonbuilding starts were up 22 percent. For the 12 months ending August 2023, total construction starts were unchanged. Nonbuilding starts were 20 percent higher, and nonresidential building starts gained 6 percent. Conversely, on a 12-month rolling basis, residential starts posted a 17 percent decline overall.
“Despite the August gain, the construction sector is running uphill,” says Richard Branch, chief economist at Dodge Construction Network. “Fear of an imminent recession seems to have abated, which should provide a boost of confidence to the sector. However, higher interest rates, labor shortages, and significantly tighter lending standards will weigh down starts in the final quarter of the year. This will persist for the foreseeable future, lasting until interest rates start to move lower.”
Nonresidential building starts gained 40 percent in August to a seasonally adjusted annual rate of $475 billion, largely due to a surge in manufacturing activity. Nonresidential building starts would have gained 24 percent when excluding these large manufacturing projects. Commercial starts rose 8 percent in August led by gains in parking structures and hotels, and institutional starts rose 35 percent with all sectors but dormitories increasing. Manufacturing starts rose 285 percent from July to August, fueled by two large projects. On a year-to-date basis through August, total nonresidential starts were 9 percent lower than that of 2022. Institutional starts gained 3 percent, while commercial and manufacturing starts fell 8 percent and 32 percent, respectively.
For the 12 months ending August 2023, total nonresidential building starts were 6 percent higher than August 2022. Manufacturing starts were 2 percent higher. Institutional starts improved 8 percent, and commercial starts gained 6 percent.
The largest nonresidential building projects to break ground in August were the $2.5-billion John Palmour Manufacturing Center for Silicon Carbide in Siler City, N.C., the $2-billion VinFast electrical vehicle plant in New Hill, N.C., and the $1.4-billion Midfield Satellite Concourse at Los Angeles International Airport.