At a seasonally adjusted annual rate of $636.7 billion, new construction starts in May increased 5% from April, according to Dodge Data & Analytics.  Much of the growth came from the nonbuilding construction sector (public works and electric utilities), which was lifted by a $3.8 billion oil pipeline in the upper Midwest as well as by seven power plant projects with a combined cost of $4.3 billion. Residential building edged up slightly in May, as multifamily housing bounced back from its subdued April performance.  However, nonresidential building in May retreated, sliding for the second month in a row after the elevated activity reported in March.  During the first five months of 2016, total construction starts on an unadjusted basis were $256.7 billion, down 12% from the same period a year ago.  Last year's January-May period featured 12 exceptionally large projects valued each at $1 billion or more, including a $9.0 billion liquefied natural gas export terminal in Texas, an $8.5 billion petrochemical plant in Louisiana, the $2.5 billion 30 Hudson Yards office tower in New York NY, and the $2.3 billion Interstate 4 Ultimate Project in Orlando FL.  In contrast, the January-May period of 2016 included only four projects valued at $1 billion or more.  If these exceptionally large projects are excluded from the comparison, total construction starts during the first five months of 2016 would be down 0.3%, or essentially even, with last year.

The May statistics raised the Dodge Index to 135 (2000=100), up from 129 in April.  The Dodge Index had shown moderate improvement during February and March, averaging 141, before slipping back in April. "The construction start statistics have shown annual increases since 2010, including a 10% gain in 2015, although the month-to-month pattern has been frequently uneven," stated Robert A. Murray, chief economist for Dodge Data & Analytics.  "This up-and-down behavior continues to be present in 2016, with May seeing a partial rebound after the setback in April.  In addition, the year-to-date comparisons in early 2016 relative to last year have been complicated by the fact that the first half of 2015 witnessed elevated levels arising from a number of exceptionally large projects (defined as projects valued at $1 billion or more).  There were considerably fewer such projects during the second half of 2015, and this lower base should enable the year-to-date comparisons to improve as 2016 proceeds.  The environment for construction still carries a number of positives – long term interest rates remain low, commercial development is being financed from multiple sources, construction bond measures are being passed at the state level, and the new multiyear federal transportation bill is in place. On the cautionary side, bank lending standards for commercial real estate loans began to tighten during the second half of 2015, and this trend has continued into 2016."

Nonbuilding construction in May jumped 24% to $193.0 billion (annual rate).  The public works categories as a group increased 15%, helped especially by a 47% hike for miscellaneous public works, which includes such diverse project types as pipelines, rail and airport runway projects, and site work.  May's data included the start of the Dakota Access Pipeline, with an estimated construction start cost of $3.8 billion, located in the states of North Dakota, South Dakota, Iowa, and Illinois.  This oil pipeline will connect the Bakken and Three Forks production areas in North Dakota to existing pipelines in Illinois.  The river/harbor development category in May climbed 81%, rebounding after a weak April.  Sewer construction in May advanced 42%, helped by the start of a $149 million sewage pumping station in Kailua HI and a $130 million sewage treatment plant upgrade in the Binghamton NY area.  Water supply construction was the one environmental public works category that declined in May, falling 40%.  Highway and bridge construction edged up 1% in May, advancing for the second month in a row following the lackluster amount reported in March.  The electric power and gas plant portion of nonbuilding construction soared 57% in May.  There were four large natural gas-fired power plants included as construction starts, located in Pennsylvania ($1.2 billion), Ohio ($890 million), Florida ($750 million), and Texas ($575 million).  There were also three large wind farms that reached groundbreaking in May, located in Kansas (two projects valued at $400 million and $220 million, respectively), and North Dakota ($249 million).  Murray noted, "Last December Congress approved an extension to the wind-energy production tax credit through 2019, which is contributing to the healthy pace for new wind power projects so far in 2016."

Residential building, at $272.5 billion (annual rate), improved 1% in May.  The multifamily side of the housing market provided the upward push, increasing 15%.  There were eight multifamily projects valued at $100 million or more that reached groundbreaking in May, compared to five such projects in April.  The May large projects were led by a $500 million apartment tower in Chicago IL, followed by a $453 million apartment tower in Jersey City NJ, and the $345 million apartment portion of a $500 million mixed-use high-rise in New York NY.  Through the first five months of 2016, New York NY continued to be the leading metropolitan area in terms of the dollar amount of multifamily starts, followed by Miami FL, Chicago IL, Boston MA, and Los Angeles CA.  Metropolitan areas ranked 6 through 10 during this period were San Francisco CA, Washington DC, Denver CO, Atlanta GA, and Dallas-Ft. Worth TX.  Of these ten metropolitan areas, eight showed double-digit gains compared to a year ago, while two showed declines – New York NY, down 16%; and Washington DC, down 25%. Single family housing in May slipped 4%, not yet able to re-establish an upward trend in a sustainable manner despite continued low mortgage rates.  By major region, single family housing in May showed this pattern compared to April – the Midwest, down 7%; the South Atlantic, down 6%; the West, down 4%; the South Central, no change, and the Northeast, up 3%.

Nonresidential building in May decreased 6% to $171.2 billion (annual rate), marking the second straight monthly decline after the heightened activity in March.  The commercial building categories as a group experienced a 9% shortfall in May.  Hotel construction, which had been particularly strong during the initial months of 2016, fell 22%.  Large projects that reached groundbreaking in May included the $97 million hotel portion of the $500 million mixed-use high-rise in New York NY and a $75 million Marriott hotel in Menlo Park CA.  While noteworthy projects by themselves, they were smaller in scale than the substantial hotel and casino projects that reached groundbreaking in February and March. Office construction in May dropped 11%, despite the start of a $191 million office building in Brooklyn NY, a $139 million renovation of a federal government office building in Washington DC, and a $95 million renovation of an office campus in Akron OH.  Both stores and warehouses stayed close to their April levels, posting small declines of 1% and 3% respectively.  The manufacturing plant category in May retreated 37%, following April's 38% hike that included the $717 million expansion to an alpha olefins plant in Louisiana.

The institutional side of the nonresidential building market held steady in May.  The educational facilities category rose a moderate 4%, lifted by the start of a $111 million science and technology center at Chapman University in Orange CA, an $80 million renovation of a high school in Hartford CT, and a $77 million engineering building at San Diego State University in San Diego CA.  Healthcare facilities increased 7%, boosted by groundbreaking for a $230 million hospital in Baton Rouge LA and a $177 million hospital in Fulton MO.  Moderate growth was also reported for church construction, up 6%; and public buildings (courthouses and detention facilities), up 9%.  On the negative side, transportation terminal work slipped 9% in May, and amusement-related construction fell 13%.  Even with its May decline, the amusement category did include the start of the $129 million renovation of the Target Center Arena in Minneapolis MN and a $98 million "convening" center at Harvard Business School in Allston MA.

The 12% decline for total construction starts on an unadjusted basis during the first five months of 2016 was due to diminished activity for both nonbuilding construction and nonresidential building, compared to their brisk pace of a year ago.  Nonbuilding construction dropped 24% year-to-date, with public works down 13% and electric utilities/gas plants down 39%.  Nonresidential building fell 21% year-to-date, with commercial building down 7%, institutional building down 12%, and manufacturing building down 70%.  Residential building continues to be the one major sector that's showing year-to-date growth, climbing 6% with single family housing up 9% and multifamily housing holding steady with the prior year.  By geography, total construction starts during the first five months of 2016 revealed a mixed pattern – the South Central, down 36%; the Northeast, down 8%; the West, down 2%; the South Atlantic, no change; and the Midwest, up 7%.