Construction Spending Climbs to All-Time High in December
Construction spending rose 0.7% in December to close out the year at a seasonally adjusted annual rate of $1,253.3 billion, the highest it’s been all year. increased November previously held that distinction at $1,257.0 billion, but that figure has been revised down to $1,245.1 billion. October’s estimate was also revised down from $1,247.1 billion to $1,237.6 billion. Construction spending for December 2017 was up 2.6% year-over-year from $1,221.6 billion in December 2016.
The value of total construction put in place (CPIP) for 2017 was $1,230.6 billion, a 3.8% increase over 2016’s total CPIP of $1,185.7. This is the sixth consecutive year annual CPIP has increased, total CPIP is up 56% since 2011. Construction spending is at an all-time high, but it should be noted that this is the second year in a row where the rate of construction spending growth has slowed.
Total nonresidential construction spending was at a seasonally adjusted annual rate of $720.4 billion, a 0.8% increase over November’s revised estimate of $714.4 billion. Total nonresidential CPIP for 2017 was $708.2 billion, 0.6% below the 2016 total of $712.5 billion.
In December, total residential construction was at an estimated seasonally adjusted annual rate of $532.9 billion, up 0.4% from November’s revised estimate of $530.6 billion and 6.2% higher year over year. Total residential CPIP in 2017 was $522.3 billion, a 10.4% increase over 2016’s $473.2 billion.
Total private construction spending in December was at a seasonally adjusted annual rate of $963.2 billion. This is up 0.8% over November's revised estimate of $955.9 billion.
December’s estimate for private nonresidential construction spending was at a seasonally annual adjusted rate of $437.1 billion, a 1.1% increase over November’s revised estimate of $432.1 billion. Private nonresidential CPIP for 2017 totaled $434.8 billion, a 0.6% increase over 2016.
Private residential construction spending was at a seasonally adjusted annual rate of $526.1 billion in December. This is up 0.5% from November’s revised estimate of $523.8 billion. Private residential CPIP in 2017 totaled $515.9 billion, a 10.6% increase over the $466.6 spent in 2016.
The seasonally adjusted annual rate for public construction spending was $290.0 billion in December. This is 0.3% above November’s estimate which was revised down from $292.7 billion to $289.1 billion. The total value of public CPIP in 2017 was $279.8 billion, a 2.5% drop from the $287.0 billion spent in 2016. Here’s hoping we get that promised infrastructure spending plan we’ve been promised to get public construction spending back on track in 2018.
ConstructConnect Chief Economist Alex Carrick’s take on the latest construction spending report:
“While the value of total U.S. put in place construction, as measured by the Census Bureau, ended last year on an upbeat note, with December +0.7% versus November (seasonally adjusted), the 2017 annual volume registered a significant slowdown versus the previous five years.
2017’s year-over-year total U.S. construction activity was only +3.8% compared with performances of +6.5% in 2016, +10.7% in 2015, +11.0% in 2014, +6.6% in 2013 and +7.9% in 2012. In 2011, there had been a change of -2.6%.
The average annual increase in total construction over the five years from 2012 to 2016 was +8.5%.
Residential construction in 2017 did much better than nonresidential, +10.4% versus -0.6%. Even residential, however, moved forward slower than its previous five-year average, +13.4%. Nonresidential was well below its previous five-year average of +5.9%.
Some nonresidential building categories managed decent showings in 2017. ‘Commercial’ - which is retail, warehousing and restaurants - was a surprisingly strong +13.5%. ‘Lodging’ was +5.7%, easing back from its previous five-year average of +24.2%. ‘Office’ was +2.1%, down from its previous five-year average of +13.7%.
‘Health care’ was +3.3% (versus -0.7% on average from 2012 to 2016) and ‘educational’ was +2.5% (up from +1.1% on average from 2012 to 2016). School facilities (with a 7.3% share of total construction) played a role that was more than twice as big as medical facilities (a 3.5% share) in 2017.
Manufacturing facilities investment was a disappointing -12.6% in 2017. The sector’s prior five-year average had been +14.0%.
Several engineering subcategories also came up short last year. ‘Power’ was -6.3% (versus +7.9% from 2012 to 2016) and ‘highway and street’ was -3.8% (versus +2.9%). ‘Power’, which encompasses electricity generating stations and transmission lines, plus oil and gas works such as pipelines, accounted for the largest share (8.6%) of total construction among all non-residential type-of-structure sub-categories last year. (The residential versus non-residential split was 41% to 59%.)
There are indications that put in place construction did pick up the pace in the final quarter of last year. The latest three months of total activity, versus the prior three months (all seasonally adjusted), expressed as an annual growth rate, was +7.1%. Nonresidential construction, on the same basis, was +9.5%.”