Construction Spending Slips in December, Yearly Totals Increase in Most Segments

Construction spending declined by 0.6 percent from November to December but increased from a year earlier in most major categories, according to an analysis of new government data by the Associated General Contractors. The new spending data shows strong overall demand for construction services, but association officials cautioned that labor shortages could undermine continued growth for the industry.

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

Construction spending totaled $1.29 trillion in December at a seasonally adjusted annual rate, a drop of 0.6 percent from the November rate but an increase of 1.6 percent compared to December 2017. For 2018 as a whole, spending increased 4.1 percent from the 2017 total.

Private residential spending slipped 1.4 percent from November to December and 1.3 percent compared to the December 2017 rate. For the full year, residential spending increased 3.3 percent from 2017, with gains of 5.2 percent for single-family and 0.7 percent for multifamily construction.

Private nonresidential spending grew 0.4 percent for the month and 3.4 percent compared to December 2017. The full-year total was 3.5 percent higher than in 2017. Among the largest private nonresidential segments, power construction (electric power plus oil and gas field and pipeline projects) gained 3.9 percent for the full year; commercial construction (retail, warehouse and farm structures) added 2.0 percent; manufacturing construction decreased 1.7 percent and office construction increased 8.4 percent.

Public construction spending declined 0.6 percent for the month but grew 4.2 percent compared to the year-earlier month. For 2018 as a whole, public construction rose 6.6 percent. The largest public category, highway and street construction, increased 4.2 percent. Educational construction, the next-largest segment, rose 3.8 percent for the year.

In the survey that the association released in January, more contractors reported they expect the dollar volume of projects available to bid on to expand than to shrink in 2019 in each of 13 project categories. In addition, 79 percent of construction firms reported that they expect to add employees in 2019. However, nearly as many—78 percent—reported they were having trouble filling some positions and 68 percent said they expected that hiring would remain difficult or become harder.

Association officials urged federal, state and local leaders to act on the measures outlined in the association’s Workforce Development Plan. These measures include expanding funding for career and technical education programs, making it easier to set up recruiting, training and apprenticeship programs and enacting comprehensive immigration reform.

“The construction industry is one of the single greatest engines of middle-class job creation in the country,” said Stephen E. Sandherr, the association’s CEO. “If government officials won’t do more to prepare young adults for high-paying careers in construction, too many of those jobs will go unfilled.”