December was a strong month at the end of a dismal year for construction spending. Spending on construction projects was up 1.5% from November and improved 4.3% year-over-year, for a seasonally adjusted annual rate of $816.4 billion, according to data released today by the U.S. Census Bureau. However, once residential improvements (a poorly estimated category) are subtracted from the report, the monthly gain moves up to 1.8%.

Spending for the year declined 2% compared to 2010, a drop driven by declines in the private residential and public construction sectors, which were down 1.1% and 6.5%, respectively, from 2010.

But several categories in December’s report give hope for the months ahead. Overall, the privately funded residential sector was up 2.1%, for a seasonally adjusted annual rate of $241.2 billion. Spending on new, single-family construction rose for the seventh consecutive month with a gain of 1.5%. While spending on privately funded multifamily projects was down 0.3%, the decline came on the tail of a 6.1% boost in November.

Given the trends seen toward the end of last year, Patrick Newport, U.S. economist at IHS Global Insight, foresees "solid increases" for the multifamily sector throughout 2012. He expects single-family spending to report more modest improvements for the first half of the year, "but double-digit growth in the second [half]," he wrote in a statement today regarding the numbers.

Private spending in the nonresidential sector was up strongly with a 3.3% gain, for a seasonally adjusted annual rate of $288.5 billion, due to improvements in several sectors. Manufacturing was up 13.6%, thanks largely to a 52.4% jump in spending on computer, electronic, and electrical plants. Private spending in the communication and power industries also showed notable improvements, moving up 6.5% and 3.2%, respectively.

Spending for public construction projects was up 0.5% for the month, at a seasonally adjusted annual rate of $286.6 billion. None of the gain came from the residential side, which was flat on a monthly basis and down 21.7% annually. Several nonresidential sectors had a strong month, however: Public commercial spending was up 2.3% from November and gained 28.5% year-over-year. Most infrastructure sectors also saw monthly improvements, with highway and street projects up 1.8%, followed by smaller but substantial gains in the transportation, sewage and waste disposal, and water supply sectors.

But infrastructure’s lift isn’t likely to last, says Newport, pointing to cash-strapped state and local government budgets. He anticipates "real spending on infrastructure and on public construction to decline moderately over the course of 2012."

Claire Easley is a senior editor at Builder.

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