Construction Spending Ended 2017 On A Strong Note

Construction ended a modest year on a strong note, rising 0.7 percent in December to lift the year-on-year gain by just more than a point to 2.6 percent. The strength has been in housing where residential spending rose 0.5 percent in the month for a yearly and very strong 6.2 percent increase. All components -- single-family, multi-family, home improvements -- have been solid contributors.

Holding down the results has been private nonresidential spending which did rise 1.1 percent in December though the yearly rate is still in the negative column at minus 2.5 percent. Spending on office construction fell 5.0 percent in the year with manufacturing and power both falling just over 10 percent. Commercial building was a positive at a 5.1 percent gain with transportation, the smallest of these subcomponents however, up an outsized 36 percent on the year.

Public spending was a positive but this is a small component compared to housing and private nonresidential. Federal spending rose 5.3 percent on the year with state and local up 4.3 percent.

The housing side of this report is positive but needs to accelerate even further to feed supply to what has been a housing sector starved of new homes and condos.

Recent History Of This Indicator:
Construction spending rose a strong and broad-based 0.8 percent in November with December's call at a gain of 0.5 percent. November spending on residential construction rose 1.0 percent led by a 1.9 percent rise for single-family homes in what promises to provide badly needed supply to a depleted market. Home improvements also showed strength, up 0.7 percent in the month, with private nonresidential spending up 0.9 percent.