Construction Spending Hits 34-Year High in 1984

WASHINGTON —  Construction spending rose 19% last year, the biggest annual increase in 34 years, the Commerce Department reported Friday.

Spending on new construction projects totaled $311.9 billion in 1984, compared to the 1983 total of $262.2 billion, the department said. It was the biggest gain since a 26% increase in 1950 and was much higher than analysts had expected when 1984 began.

“It was an excellent year and we think 1985 will show more improvement,” said Michael Sumichrast, chief economist for the National Association of Home Builders. He predicted that construction spending would rise between 8% and 10% this year.

“There are a lot of building projects in the pipeline and builders are very bullish,” he said.

The 1984 gain was led by the private sector, where building activity rose by 21% to a total of $256.2 billion. Government construction projects increased a smaller 10% to a total of $55.8 billion.

Spending on housing construction was up 21% in 1984 over the 1983 level, with single-family housing rising 15% and apartment construction jumping an even stronger 30%. Non-residential construction increased 27%, with shopping centers and similar commercial development growing by 53% in 1984, the biggest increase of any category.

Other strong construction gains were posted by office buildings, up 27%; industrial construction, up 12%, and churches and other religious buildings, up 23%.

On the government side, highway construction rose 19%, aided in part by increased revenue from the nickel-a-gallon gasoline tax that took effect in 1983. Spending on military facilities rose 10%, construction of sewer systems gained 21% and building of water systems was up an even stronger 33%, the biggest increase in government spending.

Spending for housing redevelopment dropped 4% and hospital construction was down 2% last year.

For December, construction spending came in at a seasonally adjusted annual rate of $318.7 billion, a 0.9% gain over the November level.

After adjusting for inflation, the annual increase in construction spending in 1984 was a 14.7%--the biggest inflation-adjusted gain since a 24% increase in 1950.