Dive brief:
- Non-residential construction spending rose 0.4% in December at a seasonally adjusted annual rate of $1.17 trillion, according to the Associated Builders and Contractors analysis of U.S. Census Bureau data.
- But the overall increase masks a tale of two markets, one where publicly funded non-residential activity rose 1.4%, while spending on private projects fell 0.2%.
- “This decline in private activity was offset by increased activity in the highways and streets category, which, along with other publicly funded segments, will maintain momentum in the coming months as infrastructure investments are finally kicking in,” said Anirban Basu, chief economist at ABC.
Diving knowledge:
After a the revision reversed November’s 0.1% decline Turning to the positive, December’s jump now marks the 19th consecutive month of growth, largely driven by infrastructure and manufacturing activity, said Basu, who pointed to big gains for overall spending on the year past
“Non-residential construction spending ended 2023 up more than 20% and will get a big boost in 2024,” Basu said in the statement. “While much of this strength is due to increased investment in new manufacturing structures, roughly half of the 16 non-residential subsegments saw spending increase by 20% or more in 2023.”
Notably, highway and street projects rose 4.1% in December, leading all non-residential construction subsectors.
Even with strong overall market momentum and strengthhowever, high interest rates persist, along with labor shortages and regulatory delayscould still affect the positive trajectory of construction spending, according to the Associated General Contractors of America.
This is of particular concern for private sector construction demand, according to the AGC report.
“Despite strong overall market conditions, there are a number of reasons to be cautious about how 2024 will play out for the construction industry,” AGC CEO Stephen Sandherr said in the report. The issues he listed include the need for more education and training for workers, as well as expedited permit reviews.
However, Basu noted that increased activity within the highways and streets category offset the decline in private activity. He added that the infrastructure sector, along with other segments of public financing, will maintain the momentum in the coming months as investments are made.
AGC Chief Economist Ken Simonson also echoed a cautious sentiment, but expressed optimism about growth in the sector as a whole.
“Construction spending increased overall in 2023 despite higher interest costs, labor shortages and delays in allocating federal money for infrastructure,” Simonson said. “These challenges remain in early 2024, but the industry is poised for more overall growth.”
