The U.S. Census Bureau announced that construction spending during December 2017, was estimated at a seasonally adjusted annual rate of $1,253.3 billion, 0.7 percent (±1.0 percent) above the revised November estimate of $1,245.1 billion.
The December figure is 2.6 percent (±1.3 percent) above the December 2016 estimate of $1,221.6 billion. The value of construction in 2017 was $1,230.6 billion, 3.8 percent (±1.0 percent) above the $1,185.7 billion spent in 2016.
“Construction spending ended the year on a high note, with gains over November levels for all major categories, but the annual totals for 2017 were much more mixed,” said Ken Simonson, chief economist for the Associated General Contractors of America (AGC). “For now, it appears residential construction will grow strongly again in 2018, while private nonresidential categories will be uneven, and public spending is at risk of recording a third consecutive decline.”
In December, the estimated seasonally adjusted annual rate of public construction spending was $290.0 billion, 0.3 percent (±1.5 percent) above the revised November estimate of $289.1 billion.
Highway construction was at a seasonally adjusted annual rate of $88.3 billion, 0.3 percent (±3.5 percent) above the revised November estimate of $88.0 billion.
The value of public construction in 2017 was $279.8 billion, 2.5 percent (±1.8 percent) below the $287.0 billion spent in 2016. Highway construction was $87.7 billion, 3.7 percent (±4.1 percent) below the $91.1 billion in 2016.
Public transportation construction edged down 0.9 percent. Sewage and waste disposal construction fell 13.0 percent, water supply dropped 10.3 percent, and conservation and development notched a 5.8 percent decline.
AGC officials called on federal, state and local officials to boost funding and shorten the review process for approving infrastructure projects. The officials repeated that new infrastructure funding is vital for supporting economic growth, as well as public health and safety.
“It is essential to increase the nation’s investment in roads and other transportation facilities to keep the economy growing,” said Stephen E. Sandherr, the association’s chief executive officer. “And investment in safer highways, drinking water and wastewater systems are important for public safety and health.”
Spending on private construction was at a seasonally adjusted annual rate of $963.2 billion, 0.8 percent (±1.2 percent) above the revised November estimate of $955.9 billion.
- Residential construction was at a seasonally adjusted annual rate of $526.1 billion in December, 0.5 percent (±1.3 percent) above the revised November estimate of $523.8 billion.
- Nonresidential construction was at a seasonally adjusted annual rate of $437.1 billion in December, 1.1 percent (±1.2 percent) above the revised November estimate of $432.1 billion.
The value of private construction in 2017 was $950.7 billion, 5.8 percent (±1.0 percent) above the $898.7 billion spent in 2016. Residential construction in 2017 was $515.9 billion, 10.6 percent (±2.1 percent) above the 2016 figure of $466.6 billion and nonresidential construction was $434.8 billion, 0.6 percent (±1.0 percent) above the $432.1 billion in 2016.
The National Association of Home Builders (NAHB) said that the monthly gains are largely attributed to the increase in multifamily construction spending. It rebounded strongly 2.6 percent after a dip of 0.5 percent in November, reaching a $64.0 billion annual pace in December.
“While data releases are important for many reasons, including helping us to understand what happened in the past, their principal value lies in clarifying our shared understanding of the probable future,” said Associated Builders and Contractors Chief Economist Anirban Basu. “Today’s data release, which essentially confirms the existence of the ongoing construction expansion cycle, is less useful than usual. The obvious reason is that the December data reflect a pre-existing pattern of construction spending. The future is likely to represent a departure from prior trends, in large measure because of the recently passed tax reform bill.
“Even before the United States enacted tax reform, global and domestic financial systems were flush with liquidity and capital,” said Basu. “The tax cut will further bolster liquidity and confidence, which will ultimately translate into more construction starts and spending. If long-awaited progress is made on infrastructure spending, the construction recovery will likely transition from solid to spectacular. Note that the transportation category has already expanded 12.9 percent on a year-over-year basis. During much of the past three years, spending growth generally has been concentrated in a number of key private construction segments, while public construction has tended to lag.
“Of course, industry insiders are scratching their collective heads regarding how to amass enough human capital to actually deliver construction services on time and on budget,” said Basu. “Frankly, that’s a mystery. The implication is that any infrastructure package must be accompanied by action that helps expand apprenticeship programs, steps up investment in two-year colleges, encourages high schools to offer career and technical education, and encourages more people to leap into the U.S. labor force.”