The Clearing House Real-Time Payments Tracker October 2023

Construction Spending Rises 13.9% YoY in December

construction worker

Construction spending increased in December, with both the private and public sectors making gains.

Overall, construction spending totaled $2,096.0 billion in December, 0.9% higher than November and 13.9% higher than December 2022, the U.S. Census Bureau said in a Thursday (Feb. 1) press release.

The increase seen during the month was greater than that expected by analysts, Seeking Alpha reported Thursday. The consensus forecast was for a gain of 0.5%.

Spending on private construction totaled $1,619.7 billion in December, up 0.7% from the previous month and up 11.8% from a year earlier, according to the Census Bureau press release.

Within the private construction sector, there was more residential construction but less nonresidential construction in December compared to November, the release said. Residential construction spending 1.4% higher, while nonresidential was 0.2% lower.

Public construction spending, gauged at $476.3 billion, was 1.3% higher than November and 21.3% higher than December 2022, per the release.

Within this sector, residential construction spending dropped 2.5% in December compared to November, while nonresidential increased 1.4%, the release said.

The increase in overall construction spending comes at a time when economists say it is less likely that the United States to see a recession.

Economists surveyed by The Wall Street Journal (WSJ) reduced the probability of a recession within the next year to 39%, down from 48% in October.

However, the economists also expect the economy to grow just 1% this year, down from the estimated 2.6% last year, the WSJ reported Jan. 14.

PYMNTS Intelligence has found that as post-pandemic demand for new building projects rises, late B2B payments are an endemic problem for construction firms.

These firms are more likely to experience late vendor payments than firms in other industries. While 87% of all businesses said they get paid late, 100% of construction firms said the same, according to “Late Payments Across Verticals: The Good, the Bad and the Ugly,” a PYMNTS Intelligence and Billtrust collaboration.

The report also found that the headaches caused by late B2B payments affect the entire firm, as any delay can have downstream ramifications like late payroll or vendor payments.

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