New construction starts in June dropped 15% from the previous month to a seasonally adjusted annual rate of $620.2 billion, according to Dodge Data & Analytics. The decline followed an especially strong May, which benefitted from a $9.0-billion liquefied natural gas (LNG) export terminal in Texas being entered as a May start.

By major sector, nonbuilding construction in June fell sharply as the result of a steep pullback by its electric utility and gas plant category while nonresidential building witnessed a less severe loss of momentum.  Residential building in June was able to post a slight gain, helped by  continued strength for multifamily housing. During the first six months of 2015, total construction starts on an unadjusted basis were reported at $336.0 billion, up 23% from the same period a year ago.

If the volatile electric utility and gas plant category is excluded, total construction starts during the first half of 2015 would be up a more moderate 11% from the same period a year ago.

June’s data lowered the Dodge Index to 131 (2000=100), down from 154 in May. Through the first six months of 2015, the Dodge Index averaged 144, helped by especially strong readings in February, April and May, which reflected the start of several massive projects in those months. June’s 131 for the Dodge Index is at the low end of what’s been reported so far in 2015 but still above the 125 average for 2014 as a whole.

“Notwithstanding the up-and-down pattern that’s been present on a monthly basis during the first half of 2015, the construction start statistics show that the expansion continues, with a few nuances,” said Robert A. Murray, chief economist for Dodge Data & Analytics. “The 23% year-to-date increase for total construction overstates the strength of the expansion, and the underlying rate of growth is likely around 10%. The lift to total construction starts in early 2015 by the electric power and gas plant category, namely several huge LNG terminals, will subside as the year proceeds. Public works construction revealed surprising strength during the first half of 2015, but it too is expected to subside, given essentially flat federal funding.

"On the plus side, Congress moved closer in July to taking the needed steps to shore up the depleted Highway Trust Fund. For nonresidential building, the institutional building segment has maintained the upward track established last year, and manufacturing plant construction has included the start of a few more petrochemical plants. On a mildly cautionary note, the commercial building segment showed some deceleration during the first half of 2015. Continued improvement in real estate market fundamentals should encourage a faster pace for commercial projects going forward. Residential building is seeing more growth for multifamily housing, and single-family housing is now edging upward, albeit in a very gradual and hesitant manner.”

Nonbuilding Construction

Nonbuilding construction in June plunged 38% to $162.5 billion (annual rate). The electric utility and gas plant category fell 80%, after surging 229% in May with the start of the $9.0-billion LNG export terminal in Corpus Christi, Texas, as well as three large power plants valued each in excess of $500 million.

June did include the start of several large power plants, including an $800-million, gas-fired power plant in Massachusetts and three wind farms located in Texas ($450 million), North Dakota ($320 million) and Rhode Island ($300 million), but these were generally smaller in scale than the massive projects entered as May starts.

The public works categories as a group increased 15% in June, showing improvement after slipping back during the previous two months. Highway and bridge construction in June advanced 16%, helped by the start of large highway projects in North Carolina ($368 million) and California ($253 million), as well as a bridge rehabilitation project in Massachusetts ($148 million).

The miscellaneous public works category grew 28% after a weak May, supported by the start of an $80-million stadium-improvement project at Florida State University in Tallahassee. On the environmental side, June gains were reported for sewer construction, up 19%; and water supply construction, up 3%; while river/harbor development held steady with the previous month.

For the first six months of 2015, nonbuilding construction jumped 62% compared to the same period a year ago. The electric power and gas plant category soared 351%, lifted by the start of three LNG export terminal projects located in Corpus Christi, Texas ($9.0 billion), Hackberry, La. ($8.4 billion), and Freeport, Texas ($6.0 billion), plus a liquefied petroleum gas export terminal in Freeport ($1.5 billion) and an LNG-receiving terminal in Ingleside, Texas ($1.0 billion).

While the dollar amount of gas-related projects climbed sharply in the first half of 2015, 71% growth was also reported for power plant projects, led by several large solar farms in California.

The public works categories as a group were up 14% in the first half of 2015, helped by a strong showing for highway and bridge construction that advanced 30% relative to a sluggish first half of 2014. The top five states ranked by the dollar amount of highway and bridge construction starts during the first half of 2015 were the following—Florida (reflecting the start of a $2.3-billion upgrade to Interstate 4), California, Texas, New York and Illinois.

The environmental public works categories showed a varied performance during the first half of 2015, with sewer construction up 19%, water supply construction up 6%, and river/harbor development down 2%. The miscellaneous public works category decreased 15% from its first half 2014 pace, which featured the start of several large mass transit projects.

Nonresidential Building

Nonresidential building, at $190.6 billion (annual rate), retreated 8% in June as weaker activity was reported for the majority of the structure types. The commercial building group fell 13% following a 17% increase in May. Both stores and warehouses weakened in June, dropping 9% and 53% respectively, while hotel construction slipped 11% from its heightened May amount.

Despite its May decline, hotel construction in June did see the start of several large projects, including a $411-million hotel resort in Lahaina, Hawaii, and a $97-million hotel in Charleston, S.C. Office construction in June ran counter to the other commercial structure types, advancing 11% from the previous month.

Large office projects that reached groundbreaking in June were $575 million for the office portion of the $618-million Manhattan West project in New York City, a $202-million office building in Denver and a $95-million office building on Roosevelt Island in New York City as part of the Cornell NYC Tech Campus development. Manufacturing plant construction in June bounced back 86% from a weak May, and included such projects as a $600-million refinery expansion in Texas and a $200-million ethanol plant upgrade in Nevada.