U.S. Economic Growth Softens in Final Quarter of 2018, Says ABC

This press release has been updated. It previously stated that nonresidential structures expanded at a 6.2 percent annual rate in the fourth quarter, but it was the broader nonresidential investment category that expanded at that rate. Nonresidential investment in structures declined at a 4.2 percent annual rate in the fourth quarter. 

The U.S. economy grew at an annual rate of 2.6 percent in the fourth quarter of 2018, according to an Associated Builders and Contractors analysis of data published today by the U.S. Bureau of Economic Analysis. Year-over-year GDP growth was 3.1 percent, while average growth for 2018 was 2.9 percent.

“Today’s GDP report confirms continued strong investment in nonresidential segments in America,” said ABC Chief Economist Anirban Basu. “Separately, construction spending data show significant expenditures on the construction of data centers, hotel rooms, theme parks and fulfillment centers. These data also indicate stepped up public construction spending in categories such as transportation, education, and water systems. Despite that, today’s GDP release indicated that investment in nonresidential structures actually declined 4.2 percent on an annualized basis during last year’s fourth quarter. Despite that setback, this form of investment was up by 5 percent for the entirety of 2018.  

“Undoubtedly, some attention will be given to the fact that the U.S. economy expanded by just shy of 3 percent in 2018,” said Basu. “Unless that figure is revised upward in subsequent releases, it will mean that America has failed to reach the 3 percent annual threshold since 2005. But while much attention will be given to a perceived shortfall in growth, the fourth quarter figure of 2.6 percent signifies that the U.S. economy entered this year with substantial momentum. Were it not for a weak residential construction sector, 3 percent growth would have been attained. Moreover, the data indicate strength in disposable income growth and in business investment.

“It is quite likely that the U.S. economy will expand at around 2 percent this year,” said Basu. “Though interest rates remain low and hiring is still brisk, a number of leading indicators suggest that the nation’s economy will soften somewhat during the quarters ahead, which can be partly attributed to a weakening global economy. This won’t unduly impact nonresidential construction activity, however, since the pace of activity in this segment tends to lag the overall economy, and strong nonresidential construction spending expected in 2019. Finally, ABC’s Construction Backlog Indicator continues to reflect strong demand for contractors, which have nearly nine months of work lined up.”