Construction spending inched up in December from a month earlier and increased solidly over 2015, but the major components showed divergent trends, according to an analysis released Feb. 1 by the Associated General Contractors of America. Association officials cautioned that slowdown in spending in a number of key, private nonresidential categories could reflect broader financial uncertainty and undermine the sector's recovery.
"Home and apartment construction continued growing strongly while public construction, particularly for highways, has also advanced," said Ken Simonson, the association's chief economist. "But spending on most private nonresidential categories has stalled or turned negative in the past several months. Contractors still say they are very busy now but uncertainty over the economy may mean new projects dry up."
Construction spending in December totaled $1.117 trillion at a seasonally adjusted annual rate, less than 0.1 percent higher than the downwardly revised November total. But December 2015 activity was 8.2 percent higher than in December 2014, Simonson said.
For 2015 as a whole, spending totaled $1.097 trillion, an increase of 10.5 percent from 2014 and the highest annual total since 2007 before adjusting for inflation. But the December rate was only 0.2 percent higher than in July, indicating construction leveled off in the second half of 2015, he added.
The latest report of the Dodge Data and Analytics' "Momentum Index," released Feb. 5, was similarly cautious about U.S. construction. The index is a monthly measure of the initial report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. The index rose 2.4 percent in January from its December reading. On a year-over-year basis, the overall Index is 1.7 percent higher even though the commercial portion is down 6.8 percent, with commercial work following a sawtooth pattern, Dodge said.
The AGC said public construction spending increased 1.9 percent in December from a month before and 3.9 percent from 12 months earlier. Of the two biggest public categories, highway and street construction soared 9.4 percent for the month and 12 percent year-over-year, while spending on educational facilities dipped 0.5 percent for the month but posted a 9.4 percent year-over-year gain.
Association officials said that the increase in public sector construction spending most likely reflects recently enacted federal transportation and spending measures. They worried, however, that the economic benefits of the increased public investments could be undermined if private sector demand for nonresidential construction begins to lag. "Instead of boosting the sector's recovery, these new public investments may end up being the difference that keeps many firms in growth mode," said Stephen E. Sandherr, the AGC's chief executive officer.