NEWS
02/01/2017 05:27 EST | Updated 02/02/2018 00:12 EST

US construction activity slips in December

WASHINGTON — U.S. builders trimmed spending slightly in December as a gain in private projects was offset by a big drop in spending on government projects.

Construction spending fell 0.2 per cent after hitting the highest point in more than a decade in November, the Commerce Department said Wednesday. Spending on private projects actually kept rising in December, climbing by 0.2 per cent. But government activity fell 1.7 per cent, reflecting cutbacks at the state and local level.

The strength last month came in housing construction, which jumped 0.5 per cent, with gains in single-family homes and apartments. Spending on nonresidential activity was flat as spending on hotels, factories and transportation projects all declined.

Economists are looking for housing construction to be a key sector supporting overall economic growth in 2017.

Construction of single-family homes rose 0.5 per cent in December, while the smaller and more volatile apartment sector jumped 2.8 per cent.

In the government category, the 2.4 per cent drop in spending at the state and local government area offset a 6.1 per cent rise in spending on federal projects.

Overall spending dipped to a seasonally adjusted annual rate of $1.181 trillion after hitting $1.184 trillion in November, the highest level since April 2006. The 0.2 per cent rise in private construction in December pushed activity to a seasonally adjusted annual rate of $897 billion, the highest level for this sector since July 2006.

Economists believe construction will continue to show gains in 2017, reflecting a strong job market which should help boost housing sales.

Financial markets have pushed stock prices to record highs, reflecting in part enthusiasm over the stimulus program being pushed by President Donald Trump. In addition to tax cuts and deregulations, Trump has pledged to boost spending on the nation's aging infrastructure.

The Obama administration had tried for a number of years to get Congress to approve higher infrastructure spending, but he was blocked by opposition from Republicans who complained that the projects would increase budget deficits. Democrats in Congress have already expressed support for Trump's proposals to boost construction spending but his proposals may still face opposition from Republicans worried about high deficits.