Construction spending saw a modest increase from November to December, driven by the demand for single-family homes and data centers, according to a report released by the Associated General Contractors of America. Despite this growth, association officials expressed concerns over newly announced tariffs that could affect future spending.
"Despite declines in a few segments, construction demand remains relatively strong," stated Jeffrey Shoaf, CEO of the Associated General Contractors of America. He added that rising costs of construction materials due to tariffs might lead contractors to increase bid prices, potentially affecting future project demand.
In December, total construction spending reached $2.19 trillion at a seasonally adjusted annual rate. This marks a 0.5 percent rise from November's revised rate and a 4.3 percent increase compared to December 2023.
Private residential spending grew by 1.5 percent for the month and 6.0 percent year-over-year. Single-family homebuilding increased by 1.0 percent from November but decreased by 0.8 percent compared to the previous year. Homeowner spending on additions and renovations rose by 2.6 percent for the month and surged by 21.9 percent year-over-year. However, multifamily construction dropped by 0.3 percent in December and declined by 10.5 percent from a year earlier.
Private nonresidential spending saw a slight uptick of 0.1 percent from November and an annual increase of 2.3 percent. Data center spending, categorized under office construction by the Census Bureau, rose by 0.9 percent for the month and soared by 44.5 percent year-over-year.
Public construction spending decreased by 0.5 percent for the month but increased by 4.3 percent over the past year. Highway and street construction went up by 0.7 percent in December but fell short with a yearly decline of 5.0 percent; education construction dipped slightly for the month yet grew annually; transportation spending dropped in December but showed an annual rise.
The AGC of America/Sage's recent outlook report highlighted potential tariffs as one of firms' top concerns for this year due to their impact on material prices and existing contracts.
"We are working with the Trump administration to explain the negative impacts inflation has had on our industry," Shoaf said, hoping for swift resolution on tariff-related issues so members can contribute further to economic growth.