Construction spending in December exhibited sharply varied trends, with downturns from a year earlier in every private category, mixed results for public construction, and double-digit increases in residential construction, according to an analysis of new federal construction spending data by the Associated General Contractors of America. Association officials said the new figures demonstrate how the pandemic is boosting demand for new housing while undermining demand for most other types of construction projects.
“Private nonresidential construction has declined for six months in a row, and the slide is accelerating,” said Ken Simonson, the association’s chief economist. “While some categories of public construction have held up so far, state and local budget problems are likely to drive a downturn in public project starts in the next few months.”
Construction spending in December totaled $1.49 trillion at a seasonally adjusted annual rate, an increase of 1.0% from the pace in November and 5.7% higher than in December 2019. But the gains were limited to residential construction, which soared 3.1% for the month and 20.7% year-over-year. Meanwhile, private and public nonresidential spending fell 0.8% from November and 4.8% from a year earlier¬.
Private nonresidential construction spending slumped 1.7% from November to December and 9.8 from December 2019. All 11 private nonresidential categories in the government report declined from a year earlier.
The largest private nonresidential segment, power construction, fell 10.8% year-over-year despite a gain of 0.6% from November to December. Among the other large private nonresidential project types, commercial construction—comprising retail, warehouse and farm structures—slipped 1.4% year-over-year and 2.8% for the month. Manufacturing construction tumbled 17.6% from a year earlier and 5.6% for the month. Office construction declined 3.3% year-over-year despite edging up 0.2% in December. Healthcare construction fell 8.7% from the year before and 3.0% since November.
Public construction spending increased 3.0% year-over-year and 0.5% for the month. Results were mixed among the largest segments. Highway and street construction rose 3.9% from a year earlier and 0.9% for the month. Educational construction increased 4.5% year-over-year and 0.6% in December. But spending on transportation facilities declined 1.0% for the year despite a gain of 0.9% in December.
Private residential construction spending increased for the seventh-straight month, jumping 20.7 year-over-year and 3.1% in December. Single-family homebuilding leaped 23.8% compared to December 2019 and 5.8% for the month. Multifamily construction spending climbed 17.8% for the year and inched up 0.1% for the month.
Association officials said commercial construction was likely to suffer amid weakening demand unless Congress and the Biden administration enact new recovery measures, including backfilling local construction budgets and passing new infrastructure funding. They said the new federal investments were needed to sustain construction employment levels in many parts of the country until private sector demand recovers.
“Even as they work out details on the latest coronavirus relief plan, Congress and the Biden administration need to start work on measures to rebuild the economy and recover lost jobs,” said Stephen E. Sandherr, the association’s chief executive officer. “One of the most effective ways to help the newly unemployed will be to rebuild aging infrastructure and maintain state and local construction budgets.”
Related Stories
Industry Research | Jan 23, 2024
Leading economists forecast 4% growth in construction spending for nonresidential buildings in 2024
Spending on nonresidential buildings will see a modest 4% increase in 2024, after increasing by more than 20% last year according to The American Institute of Architects’ latest Consensus Construction Forecast. The pace will slow to just over 1% growth in 2025, a marked difference from the strong performance in 2023.
Construction Costs | Jan 22, 2024
Construction material prices continue to normalize despite ongoing challenges
Gordian’s most recent Quarterly Construction Cost Insights Report for Q4 2023 describes an industry still attempting to recover from the impact of COVID. This was complicated by inflation, weather, and geopolitical factors that resulted in widespread pricing adjustments throughout the construction materials industries.
Hotel Facilities | Jan 22, 2024
U.S. hotel construction is booming, with a record-high 5,964 projects in the pipeline
The hotel construction pipeline hit record project counts at Q4, with the addition of 260 projects and 21,287 rooms over last quarter, according to Lodging Econometrics.
Multifamily Housing | Jan 15, 2024
Multifamily rent growth rate unchanged at 0.3%
The National Multifamily Report by Yardi Matrix highlights the highs and lows of the multifamily market in 2023. Despite strong demand, rent growth remained unchanged at 0.3 percent.
Self-Storage Facilities | Jan 5, 2024
The state of self-storage in early 2024
As the housing market cools down, storage facilities suffer from lower occupancy and falling rates, according to the December 2023 Yardi Matrix National Self Storage Report.
Designers | Dec 25, 2023
Redefining the workplace is a central theme in Gensler’s latest Design Report
The firm identifies eight mega trends that mostly stress human connections.
Contractors | Dec 12, 2023
The average U.S. contractor has 8.5 months worth of construction work in the pipeline, as of November 2023
Associated Builders and Contractors reported today that its Construction Backlog Indicator inched up to 8.5 months in November from 8.4 months in October, according to an ABC member survey conducted Nov. 20 to Dec. 4. The reading is down 0.7 months from November 2022.
Market Data | Nov 27, 2023
Number of employees returning to the office varies significantly by city
While the return-to-the-office trend is felt across the country, the percentage of employees moving back to their offices varies significantly according to geography, according to Eptura’s Q3 Workplace Index.
Market Data | Nov 14, 2023
The average U.S. contractor has 8.4 months worth of construction work in the pipeline, as of September 2023
Associated Builders and Contractors reported that its Construction Backlog Indicator declined to 8.4 months in October from 9.0 months in September, according to an ABC member survey conducted from Oct. 19 to Nov. 2. The reading is down 0.4 months from October 2022. Backlog now stands at its lowest level since the first quarter of 2022.
Multifamily Housing | Nov 9, 2023
Multifamily project completions forecast to slow starting 2026
Yardi Matrix has released its Q4 2023 Multifamily Supply Forecast, emphasizing a short-term spike and plateau of new construction.