The U.S. construction sector posted a 0.6% decline in December spending, the largest monthly drop since 2011, as both private and public investment contracted, according to Commerce Department data. The unexpected contraction has prompted economists to lower fourth-quarter GDP growth projections to 2.5% annually from 2.6%, reflecting broader economic deceleration.
The report highlighted fading momentum from 2018's tax cuts and government spending, compounded by trade tensions with China and global economic headwinds. December's construction spending decline followed weak retail sales, housing starts, and home sales data, with the report delayed by a five-week government shutdown that ended in January.
Moody’s Analytics economist Steven Shields noted the data aligns with the economy losing steam, while JPMorgan’s Daniel Silver warned of downside risks to first-quarter growth. Private construction investment fell 0.6% in December, with residential projects declining 1.4% after a November rebound. Residential investment contracted 0.2% in 2018, the worst performance since 2010.
Public construction spending dropped 0.6% in December, hitting an eight-month low, while nonresidential projects showed mixed results. Manufacturing and power plant investments rose 0.4% in December, but state and local government projects fell 0.5%. Construction spending increased 1.6% year-over-year but marked the weakest growth since 2011.
