The United States construction industry experienced a notable 3.8 percent increase in total spending during 2017, reaching approximately $1.25 trillion by December of that year. This growth occurred despite significant headwinds in public sector investment and several major nonresidential categories that saw declining activity. Industry professionals tracking these shifts can examine how construction spending rises on residential strength and public infrastructure gains to understand the broader trends shaping the market. The data, published by the U.S. Census Bureau and analyzed by economists at Wells Fargo and the Associated Builders and Contractors, revealed a construction landscape driven overwhelmingly by housing demand even as public outlays contracted.
Breaking Down the 2017 Construction Spending Figures
The headline number for 2017 construction spending showed total value of construction put in place rising 3.8 percent compared to 2016 levels. According to an industry analysis by For Construction Pros on 2017 US construction spending growth, December alone managed a 0.7 percent monthly rise to a seasonally adjusted annual rate of $1.25 trillion. Nonresidential construction spending expanded 0.8 percent in December, reaching a seasonally adjusted annual rate of $720.4 billion. This marked the fifth consecutive month during which the pace of nonresidential spending accelerated, suggesting that momentum was building in the latter half of the year.
However, the annual picture told a more nuanced story. Total private construction spending rose 5.8 percent for the year to $950.7 billion. The primary driver was residential construction, which grew 10.6 percent to $515.9 billion. Other gainers on the private side included commercial spending, which leaped 14 percent to $83.8 billion, and transportation, which jumped 12.5 percent to $14.6 billion. Yet the largest private construction sector by dollar value — power — dropped 4.2 percent to $92.6 billion, while spending on manufacturing plunged 12.7 percent to $65.2 billion.
The Six Largest Nonresidential Categories Under Pressure
The six largest nonresidential spending categories experienced an aggregate drop of nearly 11 percent in 2017. These categories included power, educational, highway and street, commercial, office, and manufacturing construction. The divergence within this group was striking:
- Commercial construction jumped 13.5 percent, largely offsetting weakness in other sectors.
- Manufacturing construction plunged 12.6 percent, representing the steepest decline among the six categories.
- Power sector fell 6.3 percent, weighing heavily on the nonresidential total given it was the largest segment.
- Educational construction grew a modest 2.5 percent, showing resilience in institutional spending.
- Office construction rose 2.1 percent, maintaining steady but unspectacular growth.
- Highway and street construction in the public sector declined 3.7 percent, reflecting reduced government investment.
The data indicates that nonresidential construction was a mixed bag, with some segments thriving while others contracted sharply. Understanding how these segments interact is essential for contractors, with essential insights on construction tools list with images for building construction providing practical guidance for professionals navigating diverse project types.
Residential Construction: The Engine of Growth
Residential construction emerged as the dominant force behind the 3.8 percent overall spending increase. Total residential spending for 2017 jumped 10.4 percent to $522.3 billion. By the end of the year, the residential segment had grown slightly larger than the combined value of the six largest nonresidential segments, underscoring the critical role housing plays in the broader construction economy.
Several factors contributed to residential strength:
- Low unemployment levels supported consumer confidence and homebuying capacity.
- Favorable interest rate environment kept mortgage borrowing costs attractive.
- Limited housing inventory in many markets drove new construction activity to meet demand.
- Population growth in the South and West regions created sustained demand for single-family and multifamily units.
Private residential construction specifically grew 10.6 percent to $515.9 billion. This growth was not uniform across all housing types, however. Single-family construction led the charge, while multifamily activity showed more moderate gains as the apartment boom of the early 2010s began to moderate. The residential surge helped compensate for the nearly 11 percent aggregate decline in the six key nonresidential categories, making housing the indispensable pillar of 2017 construction performance.
Housing Market Dynamics in 2017
The housing market in 2017 was characterized by rising home prices, constrained supply, and demographics that favored new construction. The National Association of Home Builders reported growing confidence among builders, and permit issuance stayed at healthy levels throughout the year. First-time homebuyers faced challenges from rising prices, but overall demand remained robust enough to sustain double-digit spending growth in the residential sector.
| Construction Sector | 2017 Change | Total Spending (Billions) |
|---|---|---|
| Total Private Construction | +5.8% | $950.7 |
| Residential (Private) | +10.6% | $515.9 |
| Commercial (Private) | +14.0% | $83.8 |
| Power (Private) | -4.2% | $92.6 |
| Manufacturing (Private) | -12.7% | $65.2 |
| Public Construction | -2.5% | Declined overall |
| Highway and Street (Public) | -3.7% | $87.7 |
| Total All Construction | +3.8% | ~$1,250.0 |
The table above illustrates the divergent performance of major construction sectors in 2017. Residential and commercial segments showed strong positive growth, while power, manufacturing, and public categories pulled in the opposite direction.
Public Sector Decline and Its Implications
Public construction spending fell 2.5 percent during 2017, more than doubling the 1.2 percent decline recorded in 2016. This deepening contraction in government-funded construction represented a significant drag on overall industry performance. The public sector’s largest category — highway and street construction — declined 3.7 percent to $87.7 billion. Other public infrastructure categories also experienced downward pressure, reflecting constrained state and local government budgets as well as delays in federal infrastructure initiatives.
The decline in public outlays was particularly notable because it occurred during a period when overall economic conditions were improving. Tax revenues at the state and local level were generally rising, yet public construction spending continued to shrink. This pattern suggests that political and administrative factors, rather than purely economic ones, played a role in restraining government construction investment. Understanding the key facts about construction project life cycle phases in life cycle of a construction project helps contextualize how public sector projects move from planning through completion and why delays in funding approval can have outsized effects.
Momentum Shift in the Second Half
Analysis of the monthly figures suggests U.S. construction spending gained momentum in the second half of 2017. According to Wells Fargo economists, total construction outlays increased every month from August onward, supported by stronger readings for both public and nonresidential outlays. This improvement represented a considerable turnaround relative to the first half of the year. Transportation spending in particular appeared to help lift both public and private categories during the latter six months.
The year-end momentum provided a foundation for optimism heading into 2018. As reported by For Construction Pros on US nonresidential construction spending, nonresidential outlays remained stable despite the lack of explosive growth, suggesting a floor had been established. The challenge for industry participants would be sustaining the positive trajectory while navigating ongoing weakness in public sector investment and manufacturing construction.
Economic Outlook and Industry Expectations for 2018
Looking ahead to 2018, industry economists offered cautiously optimistic projections. The value of U.S. construction put in place had already exceeded the pre-recession peak since mid-2016, and the foundation was in place for continued expansion. Anirban Basu, chief economist for the Associated Builders and Contractors, noted that even before the United States enacted tax reform, global and domestic financial systems were flush with liquidity and capital.
Basu identified several factors that could drive construction growth in 2018 and beyond:
- Tax reform effects: The tax cuts enacted in late 2017 were expected to further bolster liquidity and confidence, translating into more construction starts and spending.
- Infrastructure potential: If long-awaited progress was made on federal infrastructure spending, Basu predicted the construction recovery would likely transition from solid to spectacular.
- Private sector concentration: During much of the preceding three years, spending growth had been concentrated in a number of key private construction segments, while public construction lagged. Any shift in public policy could rebalance the equation.
- Financial system readiness: Global capital markets were positioned to fund large-scale projects, assuming political and regulatory clarity could be achieved.
The tax reform legislation passed in December 2017 was widely expected to provide a boost to corporate investment, including in construction-related capital expenditures. Lower corporate tax rates meant businesses would have more capital available for expansion, renovation, and new facility construction. However, the timing and magnitude of this effect remained uncertain, with most economists expecting the impact to materialize gradually over the course of 2018 rather than immediately.
Challenges on the Horizon
Despite the positive momentum, several challenges threatened to constrain construction growth. Rising material costs, particularly for lumber, steel, and concrete, squeezed profit margins for contractors and developers. Labor shortages persisted across the industry, with many firms reporting difficulty finding qualified workers for both skilled trades and supervisory positions. The decline in public construction spending showed no signs of reversing quickly, and the power sector faced ongoing uncertainty related to energy market transitions.
Contractors and construction firms needed to adapt to these conditions by improving project management practices, investing in workforce development, and leveraging technology to improve productivity. The divergence between residential strength and nonresidential weakness also required strategic positioning, with firms increasingly specializing in sectors where demand was growing rather than relying on broad-based market participation.
The 2017 construction spending data ultimately tells a story of a resilient industry navigating structural change. Residential construction carried the weight, public investment declined, and nonresidential segments showed a deeply uneven performance. The lessons from this period remain relevant for understanding how different parts of the construction economy respond to macroeconomic conditions, policy changes, and demographic trends. For those seeking further context, understanding how commercial construction differs from residential construction provides valuable perspective on why these sectors performed so differently during this period.