Dive Brief:
- Total construction starts increased 48% in July to a seasonally adjusted annual rate of $1.36 trillion despite speculation of a recession, according to Dodge Data & Analytics.
- The increase was largely driven by the 79% jump in nonresidential building starts and the 120% increase in nonbuilding starts, according to the report.
- That significant jump in construction activity “is another indicator that the U.S. is not currently in a recession,” said Richard Branch, chief economist at Dodge. However, Branch warned continued interest rate hikes could lead to a “slowdown in construction starts by year-end.”
Dive Insight:
The onshoring trend continues to make a substantial impact on total construction starts, according to Dodge.
Three large manufacturing plants and two multi-billion-dollar LNG export facilities largely accounted for the 48% gain in total construction starts.
The three manufacturing projects are the $10 billion Intel Semiconductor plant in Jersey Township, Ohio, the $2.9 billion BlueOval SK Battery Park Ford plant in Glendale, Kentucky and the $2.8 billion BlueOval City manufacturing campus in Stanton, Tennessee.
Manufacturing starts increased 185% during the first seven months compared to the same period last year, according to Dodge. For the 12 months ending July 2022, manufacturing starts jumped 170%, according to Dodge.
The two LNG facilities are the $9.4 billion first phase of the Driftwood LNG export terminal in Calcasieu Parish, Louisiana and the $7 billion third stage of the Cheniere Corpus Christi LNG in Gregory, Texas.
Without the three aforementioned manufacturing plants and two LNG facilities, total construction starts would have increased 7%. But that’s still a reason for optimism, said Branch.
“Megaprojects aside, construction continues to improve despite the pressure created by higher interest rates and labor scarcity,” said Branch. “However, the Federal Reserve will continue to aggressively raise interest rates until they feel that inflation is under control. This will create mounting pressure on building activity and potentially lead to a slowdown in construction starts by year-end.”
Total construction jumped 11% in the first seven months of 2022 compared to the same period in 2021. During that same span, nonresidential building starts and nonbuilding starts rose 22% and 16%, respectively.
For the 12 months ending July 2022, total construction starts were 10% above the 12 months ending July 2021. Nonresidential starts and nonbuilding starts were 21% and 10% higher, respectively.
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