27% Drop in Construction Starts Is Not Sign of Industry Downturn, Dodge Economist Says

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A 27% drop in construction starts in the U.S. during the second quarter of 2019 is not a sign of an impending industry downturn, according to Robert Murray, Chief Economist of Dodge Data & Analytics.

Murray stated that the steep decline in construction starts is due to a few large projects coming on-line at the end of the first quarter and held over into the second quarter. He said that the timing of these projects is not indicative of any long-term trend in the industry.

The decrease in construction doesn’t reflect worries about an industry comprising two percent of the U.S. economy, Murray said. “It’s important to remember that these large projects can often be quite volatile and will cause variations in the pace of construction starts,” he stated.

The following figures also illustrate a positive outlook for the industry. Value of total construction starts only dropped two percent from the previous quarter and the value of non-residential building starts dropped only 0.4 percent compared to the first quarter.

According to Murray, the industry still has strong potential for growth in 2019. “We expect to see continued increases in new construction projects, although the amount of growth may depend on the path of the overall economy,” he said.

Murray also noted that the fundamentals of construction remain very strong in the U.S. “The housing market, low unemployment rate, and increasing wages have all been tailwinds,” he said.

In conclusion, while the second-quarter was down, the construction industry remains strong and further growth is expected in the third quarter and beyond.