Nonresidential Groundbreakings Up 9% In October As Nation Walks 'Razor's Edge' Of Recession

The beleaguered U.S. construction industry has defied the odds by posting a monthly gain in the number of nonresidential groundbreakings, despite mounting costs and lending challenges.

After dropping by 23% in September, nonresidential building starts increased by 9% in October, according to Construction Dive’s analysis of a Dodge Construction Network report. 

The residential sector, on the other hand, continues to stumble, with 3% fewer starts in October than one year prior.

“While the residential sector is feeling the pain, the nonresidential building and infrastructure sectors are hitting their stride,” Dodge Chief Economist Richard Branch said in the report. “Some weakness is to be expected as the Federal Reserve continues its battle with inflation. However, the damage should be isolated to a few verticals and not as widespread as what the industry witnessed during the Great Recession.”

Following consecutive declines in August and September, total construction starts increased by 8% in October, per the report. Total year-to-date starts were up 16%, while nonresidential groundbreakings increased by 37% and residential commencements remained flat. 

Among the largest nonresidential projects to break ground in October were a $3.2B Texas Instruments chip fabrication plant in Sherman, Texas; a $2B General Motors Orion EV plant in Orion Township, Michigan; and a $1B Gevo Net-Zero 1 hydrocarbon plant in Lake Preston, South Dakota.

Collectively, nonresidential projects that kicked off in October were valued at $480.5B, according to the report.

Branch is among a growing number of experts who believe a recession is less of a guarantee than previously thought. 

Last month, the consumer price index and producer price index showed slight improvements, according to For Construction Pros. If this trend continues and the Fed continues to tighten its interest rate hikes, the U.S. could avoid a recession, Branch said during a Nov. 15 webinar. 

“We're walking the razor's edge here,” Branch said. “In our estimation, there is a very, very, very narrow path to avoiding a technical recession in 2023.”