Construction spending decreased 1.2% from November 2019 to December 2019 but is up 4.4% compared with December 2018, according to www.abc.org.
For public construction, spending decreased 0.4% for the month and is up 11.2% year-to-date. Private nonresidential spending fell 1.8% from November 2019 to December 2019 and is down 0.1% year-to-date.
“The transition from a private construction-led recovery to a public construction-led recovery is complete,” says Anirban Basu, chief economist for Associated Builders and Contractors. “During the years after the Great Recession, public construction waned as state and local governments struggled fiscally in the wake of diminished assessed property values, cautious consumers and slow income growth. Meanwhile, private construction was fueled by steady economic growth and a low cost of capital.
“But in recent years, private construction spending volumes have stopped growing and in certain instances have been shrinking,” Basu continues. “That was the situation in December, with nonresidential construction volumes in segments like commercial and lodging down on both a monthly and year-ago basis. Spending on office construction, a category supported in part by the ongoing development of data centers, also slipped for the month.”
Basu says public construction spending has been helped by improved state and local government finances.
“With income tax collections rising as more people find jobs and secure raises, property tax collections having recovered and sales tax collections climbing in conjunction with consumer spending, there is more money available for many public priorities, including infrastructure,” Basu says. “A majority of states raised gas taxes during the previous decade, generating even greater financial support for public construction. Accordingly, the infrastructure category of ABC’s Construction Backlog Indicator has been elevated in recent months, ABC’s Construction Confidence Indicator shows that contractors remain upbeat, and many public segments have experienced double-digit growth in construction spending during the past 12 months for which data are available, including highway/street, water supply and public safety.”
