Dive Brief:
- Private sector weakness largely offset modest gains in public construction spending, despite data center gains, according to the latest Associated Builders and Contractors analysis of U.S. Census Bureau data.
- Private nonresidential spending fell 0.4% month to month in January and has now declined for four consecutive months, according to the report. Public nonresidential construction spending, on the other hand, ticked up 0.6% month to month in January.
- The lengthy slide reflects lasting headwinds across private construction activity, as contractors battle with rising costs due to tariffs and geopolitical tensions, according to industry economists.
Dive Insight:
The flatlining of nonresidential construction spending stems largely from a sharp pullback in manufacturing construction, said Anirban Basu, ABC chief economist. Private nonresidential construction spending is now down 8% from the December 2023 all-time high, he said.
“While harsh winter weather likely bears some blame, the major issue is the ongoing decline in computer [and] electronic manufacturing construction,” said Basu in the release. “With CHIPS Act-incentivized megaprojects wrapping up, spending in that subcategory is down nearly 40% over the past 18 months.”
Manufacturing construction spending was down 2% month over month in January, and has slumped 15% since January of 2025.
That decline has outweighed gains in data center construction, one of the few segments still expanding, Basu added.
“With the exception of data centers, which saw another 2% jump in spending during January, there are few sources of momentum to offset the precipitous decline in manufacturing construction activity,” said Basu. “This lackluster performance is especially concerning in light of the ongoing conflict in Iran, which will ignite materials price escalation and heighten already elevated levels of economic uncertainty.”
Spending softness appeared across a majority of construction categories, with nine of 16 nonresidential subsegments posting a decline in January, according to ABC.
That trend could linger due to tariff uncertainty and geopolitical tensions, said Ken Simonson, chief economist at the Associated General Contractors of America.
“Rising construction costs and uncertainty over the impact of tariffs, war in the Middle East, and a slowing economy are leading to slowdowns and cancellations of many project types,” said Simonson in the AGC release. “Aside from investment in data centers and residential improvements, other private construction categories have been slumping for the past year.”
For example, along with the manufacturing construction slowdown, spending on commercial projects also ticked down 0.3% month to month in January, according to the data. Expenditures on water supply work also dropped, down 0.4% month to month in January, according to the report.
