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Construction Spending Ends Month, Year on High Note


The U.S. Census Bureau of the Department of Commerce reported that construction spending during December 2014 was estimated at a seasonally adjusted annual rate of $982.1 billion, 0.4 percent (±1.3 percent) above the revised November estimate of $978.6 billion. The December figure is 2.2 percent (±1.6 percent) above the December 2013 estimate of $961.2 billion.

The value of construction in 2014 was $961.4 billion, 5.6 percent (±1.2 percent) above the $910.8 billion spent in 2013.

In December, the estimated seasonally adjusted annual rate of public construction spending was $283.5 billion, 1.1 percent (±2.1 percent) above the revised November estimate of $280.4 billion. Educational construction was at a seasonally adjusted annual rate of $61.5 billion, 0.6 percent (±3.5 percent) below the revised November estimate of $61.8 billion.

Highway construction was at a seasonally adjusted annual rate of $90.3 billion, 2.1 percent (±4.9 percent) above the revised November estimate of $88.4 billion.

The value of public construction in 2014 was $274.4 billion, 1.8 percent (±1.8 percent) above the $269.6 billion spent in 2013. Educational construction in 2014 was $62.0 billion, 1.2 percent (±3.6 percent) above the 2013 figure of $61.3 billion and highway construction was $84.4 billion, 4.1 percent (±4.4 percent) above the $81.1 billion in 2013.

Spending on private construction was at a seasonally adjusted annual rate of $698.6 billion, 0.1 percent (±1.0 percent) above the revised November estimate of $698.2 billion. Residential construction was at a seasonally adjusted annual rate of $349.6 billion in December, 0.3 percent (±1.3 percent) above the revised November estimate of $348.4 billion. Nonresidential construction was at a seasonally adjusted annual rate of $349.0 billion in December, 0.2 percent (±1.0 percent) below the revised November estimate of $349.8 billion.

The value of private construction in 2014 was $687.0 billion, 7.2 percent (±1.3 percent) above the $641.1 billion spent in 2013. Residential construction in 2014 was $350.0 billion, 4.1 percent (±2.1 percent) above the 2013 figure of $336.2 billion and nonresidential construction was $337.0 billion, 10.5 percent (±1.3 percent) above the $304.9 billion in 2013.

According to IHS Global Insight U.S. Economists Patrick Newport and Stephanie Karol, this was a decent report, with two exceptions. The first is the continued contraction in spending on residential improvements; the second is the month-on-month decline in nonresidential construction.

Public spending on power structures advanced 18.4 percent month-on-month in December, giving the public category a much-needed boost.

Excluding residential improvements, private residential spending ended the year on a bright note. Single-family construction rose 11.0 percent above year-ago levels, while multifamily construction expanded 26.8 percent since December 2013. “Residential improvements are dragging down the headline figure, to make overall residential spending appear weaker than it was one year ago,’ they said. “This is especially misleading since improvements are estimated, rather than measured, making the headline figure a poor gauge of the housing market’s overall health,” they said.n year-over-year terms, the biggest losers are communication (down 9.7 percent) and power (down 7.6 percent). Excluding the category electric power plants, which is undergoing a correction, private nonresidential construction is growing at double-digit year-on-year rates.

As a result of this report, fourth-quarter nominal GDP should be revised up by $5.2 billion. This should provide a small boost to real GDP, nudging the fourth-quarter growth rate up to 2.7 percent (from 2.6 percent).