The strength seen in the wider economy has seemingly translated into the construction industry. Seasonally adjusted construction spending, measured in current values at annual rates, has increased by 4.2 and 13.3 percent in the quarter and year respectively as of Q4 2023.

The direction of travel, however, is downwards in terms of overall growth rates, with 2023 logging an increase of 7.0 percent. This was the slowest on record since 2019, with 2023 progressively influenced by elevated construction costs, rising interest rates and a tightening credit landscape. All of which act as barriers to construction spending.

The biggest challenges were faced by the residential, commercial and office segments. Despite remaining positive, growing by 3.2 and 5.7 and 7.2 percent respectively in the year as of Q4 2023, they have encountered notable tailwinds.

Although housing supply is restricted, mortgage affordability has held back residential development. Many banks are increasingly concerned about low yields, potential losses and the high volume of commercial real estate in their loan portfolios. The slow return to office rates holds back growth in new build office developments, while investment in improving amenities to attract tenants has been gradual.

Infrastructure remains strong and grew by 19.4 percent on the year in Q4 2023, benefiting from congressional spending arising from the Infrastructure Investment and Jobs Act and Inflation Reduction Act. Supply chain diversification, and a continued pivot to onshoring, has unlocked new opportunities and investment in manufacturing, helping the sector to grow by 67.5 percent.

Sustainability trends have also contributed to spending in both sectors, with more electric vehicle (EV) plants being built and charging stations sprouting in many parts of the country. This has been particularly prevalent in the south east and south west regions of the US.

Furthermore, healthcare and education spending levels remain solid, growing by 17.4 and 20.5 percent on the year in Q4 2023. For education, spending is fueled by trends in life sciences and many campuses updating their amenities to attract enrollment. Additionally, the research boom that emerged from COVID-19 is continuing, with funding sourced primarily through government grants.