Construction Starts Rise, Input Prices Drop in December
A year-end surge in building prevails against high rates and limited credit accessibility.
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Total construction starts increased in December as input prices for the industry sharply declined.
The Dodge Construction Network reported that construction starts grew 20% in December 2023 to a seasonally adjusted annual rate of $1.12 trillion.
Over the same month, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics Producer Price Index data, construction input prices declined 0.6 percent.
“Construction input prices fell sharply in December,” said Anirban Basu, ABC chief economist. “While plunging oil prices are the primary factor behind the sharp decline, most input prices were tame in 2023’s final month. That serves as a fitting end to a year during which aggregate input prices increased just 1.2% and many individual commodity prices fell.”
Mirroring the similarity of the monthly report, for the full year of 2023, total construction starts lost 4% compared to the previous year. Residential and nonresidential starts were down 13% and 8%, respectively, but nonbuilding starts were up 16%.
“Construction starts ended the year on a positive note,” said Richard Branch, chief economist for Dodge Construction Network. “Looking ahead, the new year provides promise that positive momentum will continue to build.”
Dodge Construction Network
“While hurdles remain, including scarce labor and tight credit, 2024 should be a more positive year for the construction sector,” Branch noted.
From an input price perspective, Basu advises caution despite the continued materials price moderation and other positive developments relating to inflation and the general outlook.
“Piracy in the Red Sea and the resulting diversion of ships from the Suez Canal around the Cape of Good Hope has caused global freight rates to nearly double in the first two weeks of 2024, according to the Freightos Baltic Index,” he said. “All else equal, rising shipping costs will put upward pressure on certain inputs.”
ABC
Here’s a summary look at the different sector building starts for December and the year:
Nonbuilding
Nonbuilding construction starts in December rose 13% to a seasonally adjusted annual rate of $253 billion. Every category saw increases according to the Dodge analysis.
Miscellaneous nonbuilding starts gained 27%, utility/gas plants rose 15%, highway and bridge starts improved by 12%, and environmental public works were up 8%.
Branch said for 2023, nonbuilding starts were up by an overall 16% with utility/gas plants rising 35%, miscellaneous nonbuilding starts increasing 19% and highway and bridge starts and environmental public works each rising 9%.
Among the largest nonbuilding projects breaking ground in December were the $1.3 billion Faraday Solar project in Elberta, Utah, the $425 million San Juan 1 solar farm in Farmington, New Mexico, and the $300 million renovation of the David Booth Kansas Memorial Stadium in Lawrence, Kansas.
Nonresidential
According to Branch, nonresidential building starts rebounded in December, gaining 37% from November to a seasonally adjusted annual rate of $479 billion.
Like nonbuilding, sizable gains were seen across all categories with manufacturing gaining 75% and commercial starts picking up 48 percent. Institutional starts rose 22% with increases in education, public buildings, and recreation offsetting a decline in healthcare starts.
Bigger nonresidential projects that got underway in December included the $2.7 billion Texas Instruments fabrication plant in Sherman, Texas, the $1.1 billion OxyChem Project Orca in La Porte, Texas, and the $815 million University of Chicago Cancer Center in Chicago, Illinois.
Branch said in 2023 total nonresidential starts were 8% lower than in 2022.
Residential
Dropping for the year, residential buildings did increase 8% in December to a seasonally adjusted annual rate of $391 billion. This included a single-family increase of 1% and a 22% rise in multifamily.
For the year, total residential starts were down by 13%, with single-family starts dropping 13%, and multifamily starts by 12%.
Dodge Construction Network
