Construction Spending Increased in December, Nonresidential and Public Construction Lags Residential Sector

Construction spending increased in December compared to both November and a year ago thanks to growing demand for residential construction, according to an analysis of federal spending data the Associated General Contractors of America released February 1. Association officials noted, however, that spending on private nonresidential construction was flat for the month and down compared to a year ago while public sector construction spending fell for both the month and the year.

“Demand for new housing remains strong, while demand for nonresidential projects has been variable and most types of public sector investments in construction are declining,” said Ken Simonson, the association’s chief economist. “Contractors coping with rising materials prices and labor shortages are also dealing with the consequences of a nonresidential market that is, at best, uneven.”

Construction spending in December totaled $1.64 trillion at a seasonally adjusted annual rate, 0.2 percent above the November rate and 9.0 percent higher than in December 2020. Full-year spending for 2021 increased 8.2 percent compared to 2020.

Private residential construction spending rose 0.7 percent in December from a month prior and 12.7 percent from December 2020. For 2021 as a whole, residential construction spending jumped 23.2 percent from 2020, with gains of 32.8 percent for single-family spending and 15.6 percent for multifamily spending.

Private nonresidential construction spending was nearly unchanged from November to December but increased 9.1 percent from December 2020. For all of 2021, private nonresidential spending slipped 2.3 percent from 2020. Commercial construction – comprising warehouse, retail, and farm structures – inched up 0.1 percent in December and jumped 18.4 percent year-over-year, driven by surging demand for distribution facilities. Manufacturing construction spending fell by 1.9 percent in December, after 11 consecutive months of growth, but posted a 30.4 percent gain above its year-earlier level.

Public construction declined 1.6 percent in December, with decreases in 11 of the 12 categories, and 2.9 percent year-over-year. For 2021 as a whole, public construction fell 4.2 percent from 2020. Educational construction slipped 1.4 percent for the month and skidded 8.5 percent year-over-year.

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