US construction spending edges lower in December

ConDig (04-Mar-18).  A fall in both public and private sector projects helped push US construction expenditure 0.6% lower in December, according to latest figures from the Commerce Department. 

The seasonally adjusted annual rate of spending dipped to $1.29 trillion from $1.3 trillion in November. But construction spending increased 1.6% on a year-on-year basis.

It comes as residential construction spending fell 1.4% to $545.1 billion from $550 billion the month prior, while spending on private construction projects dipped 0.6% to $991.1 billion.

Total public construction spending also edged 0.6% lower to $301.5 billion from $303.4 billion the month before as transportation expenditure slipped 1.5% to $35.5 billion, while healthcare construction crashed 7.8% to $8.6 billion. Spending on highways was also 0.9% lower at $89.1 billion.

“This data shows moderate and balanced growth across residential, private nonresidential and public construction segments,” said Ken Simonson, chief economist for the Associated General Contractors of America. ”That fits with what contractors say they expect for 2019, as the association’s survey in January revealed.”

For the year 2018, total construction spending shot up 4.1% to $1.3 trillion. It was an all-time high, but the 4.1% gain was the weakest performance since spending fell 2.6% in 2011.

It comes as latest figures from the Commerce Department also show that housing starts fell 11.2% in December to a seasonally adjusted annual rate of 1.08 million units. Multifamily starts crumbled 20.4% to a seasonally adjusted annual rate of 320,000 units, while single-family production posted a 6.7% decline to 758,000 units.

“Looking back, the December drop in housing production correlated with the peak increase in mortgage rates and corresponding decline in builder sentiment,” said National Association of Home Builders (NAHB) chairman Greg Ugalde.

“During that time, builders adopted a cautious wait-and-see approach as demonstrated in the rise of single-family and multifamily units that were permitted but not under construction.”

The NAHB said that it expected single-family production will be relatively flat in 2019, while multifamily starts are also set to level off.

It added that the builders will continue to face ongoing housing affordability concerns as they continue to grapple with a shortage of construction workers, a lack of buildable lots and excessive regulatory burdens.