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Economic Watch: Construction Starts up 34% in First Two Months of 2015

Construction starts in the U.S. posted healthy gains in February compared to the month before and the same time in 2014, according to a new report from the construction industry data provider Dodge Data and Analytics.

The 16% hike compared to January’s level was boosted party by three large projects valued at more than $1 billion, however residential building also gained, pushing the Dodge Index up to 153 compared to a revised 132 for January.

For the first two months of 2015, total construction starts were up 34% from the same period a year ago. When projects in excess of $1 billion are excluded, the result shows more moderate gains of 10% in February compared to January, and up 8% during the first two months of 2015.

"Some pullback can be expected in coming months, since there are only a limited number of liquefied natural gas related projects that may reach the construction start stage and petrochemical plants are not likely to match the exceptional amount that was reported last year, particularly with the recent decline in oil prices,” said Robert A. Murray, chief economist for Dodge Data & Analytics. “At the same time, the first two months of 2015 have shown several noteworthy features that point towards the continued expansion for overall construction activity,"

According to Murray, for residential building, multifamily housing continues to show brisk development activity in major cities, but one area of concern for overall construction activity in 2015 relates to single-family housing.

“Will it be able to move beyond the extended plateau that took hold in 2014? Another area of concern relates to public works and specifically highway and bridge construction. Will Congress be able to reach agreement on a new multi-year federal transportation bill by the end of May, or at the very least a continuing resolution that shores up the depleted Highway Trust Fund?"

The increase for total construction starts compared to the year before was the result of greater activity for all three major construction sectors, according to the report. Non-building construction year-to-date soared 89% while nonresidential building increased 22%. Residential building year-to-date improved 7%, with single family housing up 7% and multifamily housing increasing 9%.

By geography, total construction starts for the January-February revealed this behavior compared to last year with the South Central up 126%; the Northeast 12% higher; the South Atlantic adding 9%; the West increasing 3%; and the Midwest, down 5%.

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