At a seasonally adjusted annual rate of US$651.2 billion, new construction starts in May increased a slight 1% from April, according to Dodge Data & Analytics.
Public works construction bounced back 30% from its subdued April amount, helped by the May start of four large pipeline projects totalling a combined US$3 billion. This enabled the nonbuilding construction sector (which also includes electric utilities and gas plants) to register a 23% gain in May, offsetting modest 4% declines for both nonresidential building and housing. Through the first five months of 2017, total construction starts on an unadjusted basis were US$274.3 billion, down 5% from the same period a year ago. If the volatile manufacturing plant and electric utility/gas plant categories are excluded, total construction starts during the first five months of 2017 would be up 2% relative to last year.
The May statistics produced a reading of 138 for the Dodge Index (2000 = 100), slightly higher than the 137 reported for April. During this year's first quarter, the Dodge Index averaged 152. "While May revealed slight improvement over April, the pace of expansion so far this spring has generally slowed following the elevated activity in the first quarter," stated Robert A. Murray, Chief Economist for Dodge Data & Analytics.
"This is consistent with the up and down behaviour that's often been present in the current expansion, and a continuation of this pattern means that renewed strengthening can be expected in the months ahead," Murray indicated. "On the plus side, long-term interest rates remain quite low, with the 10 year Treasury bill rate easing back to 2.2% even as the Federal Reserve raised the federal funds rate another quarter point last week. Numerous state and local bond measures passed in recent years are providing near-term support for public works and institutional building. The expected benefits of a new federal infrastructure programme, assuming one gets passed during the second half of 2017, would affect construction activity more in 2018. And, while vacancy rates for commercial building and multifamily housing are beginning to rise, the increases witnessed so far have been generally small."
Nonbuilding construction in May was US$146.9 billion (annual rate), up 23%. The public works categories as a group climbed 30%, rebounding from a 48% decline in April, as the ‘miscellaneous’ public works category (which includes pipelines) soared 166%. The largest pipeline project entered as a construction start in May was the US$1.5 billion Revolution Pipeline expansion in western Pennsylvania, which includes a 100 mile natural gas pipeline gathering system that will feed into a new cryogenic gas processing plant.
Also entered as a May start were the US$690 million Gulf South Coastal Bend Header project in Texas that will deliver natural gas to a liquefaction terminal in Freeport, the US$500 million Atlantic Bridge natural gas pipeline expansion in the Northeast (New York, Connecticut, Massachusetts, Maine), and the US$300 million Cameron Access natural gas pipeline expansion in Louisiana.
Through the first five months of 2017, the dollar amount of new pipeline construction starts totalled US$13.8 billion, already topping the full year 2016 amount of US$11.6 billion. Highway and bridge construction in May grew 5%, helped by a US$192 million highway project in San Antonio (Texas) and a US$125 million bridge improvement project in the Macon area. The top five states in terms of the dollar amount of new highway and bridge construction starts in May were Pennsylvania, Texas, California, Georgia, and Florida. The environmental public works categories retreated in May, with river/harbour development down 5%, water supply construction down 9%, and sewer construction down 11%. The electric utility/gas plant category dropped 3% in May after its 71% hike in April, with the largest May projects being a US$500 million natural gas-fired power plant in Pennsylvania, a US$259 million transmission line in California, and a US$240 million wind power facility in Texas.
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