Read Ed Ed Zarenski's Prelim 2023 Construction Spending Outlook, including which category will lead construction spending.
Press Release from Associated Builders and Contractors: ABC: Nonresidential Construction Spending Dips 0.5% in December
WASHINGTON, Feb. 1—National nonresidential construction spending decreased by 0.5% in December, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. On a seasonally adjusted annualized basis, nonresidential spending totaled $943.5 billion for the month.
Spending fell on a monthly basis in 10 of the 16 nonresidential subcategories. Private nonresidential spending was down 0.5%, while public nonresidential construction spending was down 0.4% in December.
“Nonresidential construction spending fell in December, ending a streak of six straight monthly increases,” said ABC Chief Economist Anirban Basu. “Despite the decline, nonresidential spending is up 13.8% year over year, an increase outpacing both overall inflation (6.4%) and materials prices inflation (+7.6%). More than half of the increase in nonresidential construction over the past year is due to heightened activity in two segments: manufacturing, as megaprojects begin across the nation, and commercial, a category that includes warehouse- and distribution-related construction.
“While contractors remain reasonably confident, according to ABC’s Construction Confidence Index, there is reason for caution,” said Basu. “Worker shortages remain a challenge for contractors, and elevated interest rates have increased borrowing costs, making certain projects unfeasible at the margins while also driving the economy toward a potential recession this year.”
Press Release from Associated General Contractors of America: Construction Spending Slips 0.4 Percent In December, Yet Record-high December Job Openings Suggest Contractors Remain Bullish In 2023
Weather May Account for Conflicting Trends on Spending and Jobs as Construction Officials Warn of Labor Shortages and Regulatory Delays, Urge Public Officials to Ease Red Tape, Boost Construction Training
WASHINGTON, Feb. 1—Total construction spending decreased by 0.4 percent in December, yet industry job openings at the end of the month set a new high for December, according to an assessment the Associated General Contractors of America conducted today of two new federal data sets. Association officials said the jobs data signals that the slowdown in construction spending may have been more about changes in weather than demand.
“The record number of job openings in construction compared to previous Decembers suggests contractors are bullish about their backlogs despite a dip in spending in December,” said Ken Simonson, the association’s chief economist. “Some of the downturn may be due to unusually bad weather rather than a shrinking market.”
Construction spending, not adjusted for inflation, totaled $1.810 trillion at a seasonally adjusted annual rate in December, 0.4 percent below the November rate, which was revised up from the initial estimate a month ago. Spending on private residential construction decreased for the seventh consecutive month in December, by 0.3 percent. Spending on private nonresidential construction fell 0.5 percent in December, while public construction investment declined 0.4 percent.
A separate government report showed there were 359,000 job openings in construction at the end of the year, a jump of 58,000 or 19 percent from a year earlier and the highest December total in the 23-year history of the data. Openings exceeded the 217,000 workers hired during the entire month, which suggests contractors wanted to bring on board more than twice as many employees as they were able to find, Simonson added.
Spending varied among large private nonresidential segments. The biggest component, commercial construction—comprising warehouse, retail, and farm construction—increased 0.4 percent. Spending on manufacturing plants decreased 2.2 percent. Private power construction rose 0.5 percent.
Public categories were also mixed. The largest public segment, highway and street construction, increased 1.1 percent in December. Spending declined 0.3 percent for education construction. Investment in transportation facilities rose 0.2 percent.
Residential spending shrank due to a 2.3 percent contraction from November in single-family homebuilding. That outweighed increases of 3.2 percent in multifamily construction and 0.7 percent in additions and renovations to owner-occupied houses.
Association officials cautioned that labor shortages and regulatory delays on federally funded projects pose a risk for contractors in 2023. They urged the Biden administration and Congress to clarify new Buy America and registered apprenticeship requirements included in new federal funding measures. And they continued to push for immigration reform and support for construction training programs to get more people into construction careers.
“Instead of just talking about projects that someday might get built, the President and Congress should take steps to speed project reviews, reduce regulatory delays and enable men and women to pursue high-paying construction careers,” said Stephen E. Sandherr, the association’s chief executive officer.