Economists are easily surprised. Today's surprise is in regard to construction spending.

The December Construction Spending Report shows continued weakness, especially in residential construction.

Total Construction

Construction spending during December 2018 was estimated at a seasonally adjusted annual rate of $1,292.7 billion, 0.6 percent below the revised November estimate of $1,300.6 billion. The December figure is 1.6 percent above the December 2017 estimate of $1,272.6 billion. The value of construction in 2018 was $1,297.7 billion, 4.1 percent above the $1,246.0 billion spent in 2017.

Unexpected Weakness

Econoday highlights the unexpected weakness.

Construction spending fell 0.6 percent in December with year-on-year growth declining to a tepid 1.6 percent, the weakest growth rate in at least 3 years.

The unexpected monthly decline (consensus forecasts called for a moderate increase of 0.3 percent) was led by private residential construction, which fell 1.4 percent in December, as a 3.2 percent drop in spending on new single family homes overshadowed a 3.1 percent rise in spending on new multi-family units. Spending on remodeling fell 0.4 percent.

Muting the overall spending drop was a 0.4 percent increase in private non-residential construction, bolstered by a 3.3 increase in health care, a 1.7 percent rise in manufacturing, and a 1.0 percent increase in lodging.

Public construction spending fell 0.6 percent in December, driven by a 7.8 percent drop in health care, a 5.1 decrease in residential spending, a 2.9 percent decline in power, and a 0.9 percent drop in spending on highway and street construction. Partly offsetting these were increases in office construction and commercial construction of 6.4 percent and 6.1 percent, respectively.

State and local construction spending was down 0.5 percent in December, while federal construction spending fell 2.2 percent.

Year-Over-Year Comparison

Normally one uses non-seasonally-adjusted numbers for year-over-year comparisons.

Fred shows those numbers as +0.85, +4.15, and -3.71 for overall, nonresidential, and residential respectively.

Econoday notes a year-over-year overall growth rate of 1.6%.

If one uses seasonally-adjusted numbers for the comparison, Fred shows those numbers to as +1.58, +3.95, and -1.53 respectively.

No Surprise

Houses are not affordable and the slowdown is obvious. No one should be surprised by this.