U.S. construction spending drops in December, private construction outlook positive for 2017

Construction spending in the U.S. ended the year 2016 on a weak note. Spending on construction dropped 0.2 percent sequentially in December, as compared with the rise of 0.9 percent in November. Consensus expectations were for the spending to grow 0.2 percent. The decline in spending was mainly due to the 1.7 percent fall in the public sector that weighed on the overall growth.

Looking at the details, private spending grew 0.2 percent sequentially, led by residential spending that rose 0.5 percent month-on-month. In this segment, both multi-family and single-family construction spending rose.

The overall residential construction grew modestly by 0.4 percent, whereas the non-residential construction outlays dropped 0.7 percent in the month. Softness in public construction shows tighter state and local budgets as the drop was centralized in this sector.

Private construction spending grew for the third consecutive month, with residential construction rising 0.5 percent because of rises in new single- and multifamily construction countering a minor drop in home improvement. Private non-residential spending remained unchanged in December. This augurs well for the projection of 5.5 percent growth in 2017 in nominal terms as commercial construction continues to indicate sizeable gains, stated Wells Fargo in a research report.