U.S. Construction Spending Surges in December, Led by Residential Construction
Washington, D.C. – U.S. construction spending exceeded expectations in December, driven by a rise in single-family homebuilding. However, elevated mortgage rates may hinder further growth in residential construction.
The Commerce Department's Census Bureau reported a 0.5% increase in construction, following an upwardly revised 0.2% gain in November. This surpassed economists' estimates of a 0.2% expansion.
Annually, construction spending climbed 4.3% in December and advanced 6.5% in 2024.
Private construction projects saw a 0.9% increase, while residential investment rose 1.5%. New single-family construction expenditure specifically grew by 1.0%.
Despite rising mortgage rates, which have dampened builder optimism, residential construction has rebounded in recent months. However, the increase in mortgage rates, driven by inflation concerns and worries over trade and immigration policies, poses a potential threat to further growth.
Since September, the U.S. central bank has embarked on a policy easing cycle, lowering interest rates by 100 basis points before pausing in January. The Fed had previously raised rates by 5.25 percentage points in 2022 and 2023 to combat inflation.
On Saturday, President Trump imposed 25% tariffs on goods from Canada and Mexico, which could increase the cost of lumber and make new houses less affordable.
Outlays for multi-family housing units slightly dipped by 0.3% in December, while spending on home renovations increased. Investment in private non-residential structures, such as offices and factories, saw a modest 0.1% increase.
Meanwhile, public construction projects declined by 0.5% in December. State and local government spending dropped by the same margin, and federal government project outlays decreased by 0.2%.