Construction spending fell 0.4% in December from November to a seasonally adjusted annual rate of $1.809 trillion following an upwardly revised 0.5% increase in November, according to the Census Bureau. On a year-ago basis, the total value of construction was up 10.2% in in 2022, following an 8.5% increase in 2021.
Private residential spending slipped 0.3% on the month driven by a 2.3% decline in new single-family construction. Private nonresidential construction declined 0.5% from November. All major components of private nonresidential construction were up on a year-over-year basis except power and religious structures. Total public construction fell 0.4% from November but increased 4.8% from December 2021.
Construction spending was solid in 2022 likely due to the large backlog of projects caused by supply-chain issues. Construction employment was surprisingly resilient in 2022 despite the Fed’s ultra-hawkish stance. Construction employment rose 28,000 in December and 231,000 in 2022. PNC Economics forecasts a decline in construction spending in 2023 as high interest rates and reduced affordability weigh on homebuilding. Investment in residential structures (homebuilding, repairs, and renovations) fell almost 27% at an annualized rate in the fourth quarter of last year, subtracting 1.3 percentage points from growth.
The nonresidential construction sector will continue to face challenges this year due to the shift to hybrid and remote work. The Architecture Billings Index, a leading indicator for non-residential construction activity, registered at 47.5 in December, the third consecutive sub-50 contractionary reading. Infrastructure spending should provide some support to public construction in late 2023
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