US Construction Spending Rises in December

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U.S. construction spending increased 0.3% in December, rebounding from a 0.2% decline in November. The increase was driven by a rise in private construction projects, particularly single-family homebuilding and home renovations, though residential investment has declined for four straight quarters. Spending on private nonresidential structures and public construction projects both declined in December.

Why it matters

The construction industry is a key indicator of economic activity, and the increase in construction spending suggests continued strength in the housing market despite higher mortgage rates and more expensive building materials. However, the ongoing decline in residential investment raises concerns about the broader health of the construction sector.

The details

Private construction spending rose 0.5% in December, with a 1.5% increase in investment in new single-family housing projects. Spending on home renovations also continued to increase. However, spending on private nonresidential structures like offices and factories dropped 0.7%, marking the eighth consecutive quarterly decline in this category. Public construction spending decreased 0.5%, with state and local government projects down 0.7% while federal government outlays increased 1.6%.

• The data was delayed by last year's government shutdown.
• Construction spending slipped 0.4% year-on-year in December.

What’s next

A decline in mortgage rates in recent weeks could spur further construction, though building lots remain scarce. Residential investment has declined for four straight quarters, raising concerns about the broader health of the construction sector.