Nonresidential construction spending expanded 0.8% in December, totaling $720.4 billion on a seasonally adjusted basis, according to Associated Builders and Contractors’ (ABC) analysis of data released today by the U.S. Census Bureau. This represents the fifth consecutive month during which the pace of nonresidential spending has increased.
Nonresidential spending expanded 0.1% on a year-over-year basis and sits at its highest level since March. Private nonresidential construction spending increased 1.1% for the month, but is down 2.5% year over year, while public nonresidential spending increased 0.4% for the month and 4.4% for the year. Spending in the power and manufacturing categories, which are two of the largest nonresidential subsectors, contracted by a combined 10.3%, or $18.2 billion, since December 2016.
“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 ABC 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% 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.”
Related Stories
Market Data | Jan 12, 2018
Construction input prices inch down in December, Up YOY despite low inflation
Energy prices have been more volatile lately.
Market Data | Jan 4, 2018
Nonresidential construction spending ticks higher in November, down year-over-year
Despite the month-over-month expansion, nonresidential spending fell 1.3 percent from November 2016.
Contractors | Jan 4, 2018
Construction spending in a ‘mature’ period of incremental growth
Labor shortages are spiking wages. Materials costs are rising, too.
Market Data | Dec 20, 2017
Architecture billings upturn shows broad strength
The American Institute of Architects (AIA) reported the November ABI score was 55.0, up from a score of 51.7 in the previous month.
Market Data | Dec 14, 2017
ABC chief economist predicts stable 2018 construction economy
There are risks to the 2018 outlook as a number of potential cost increases could come into play.
Market Data | Dec 13, 2017
Top world regions and markets in the global hotel construction pipeline
The top world region by project count is North America.
Market Data | Dec 11, 2017
Global hotel construction pipeline is growing
The Total Pipeline stands at 12,427 Projects/2,084,940 Rooms.
Market Data | Dec 11, 2017
Construction backlog surges, sets record in third quarter
CBI is a leading economic indicator that reflects the amount of construction work under contract, but not yet completed.
Market Data | Dec 7, 2017
Buoyed by healthy economy, ABC Index finds contractors upbeat
Despite rising construction labor and materials costs, 55% of contractors expect their profit margins to expand in the first half of 2018.
Market Data | Dec 5, 2017
Top health systems engaged in $21 billion of U.S. construction projects
Largest active projects are by Sutter Health, New York Presbyterian, and Scripps Health.