Dive Brief:
- Nonresidential construction spending dropped 0.2% in May to a seasonally adjusted annual rate of $1.237 trillion, according to an Associated Builders and Contractors analysis released July 1.
- Spending fell from the month prior in eight of 16 categories, according to ABC. Private nonresidential construction fell 0.4% and public nonresidential spending remained unchanged from the month before.
- Many headwinds, such as high interest rates, a tight lending environment, new trade and immigration policies and general uncertainty may make it a challenge for spending to rebound in the second half of 2025, said ABC chief economist Anirban Basu.
Dive Insight:
May marked the fourth consecutive month of drops, Basu said. Even strong markets, such as manufacturing, have begun to decline from recent peaks. In addition, ABC’s backlog indicator experienced a sharp dip in May, indicating that contractors have less work on the books.
“Private sector nonresidential activity remains particularly weak and is down nearly 7% from its January 2023 peak,” Basu said in the release. “Manufacturing investment, which increased more than 200% in recent years, has begun to fall and is now down more than 5% since its August 2024 peak. With the exception of data centers, on which spending increased another 1% in May, there are few categories with momentum.”
In addition, May’s spending was down 3.5% year over year, the largest such decrease since February 2019, according to the Associated General Contractors of America.
“Uncertainty about tariffs, tax rates and labor availability are making it hard for many developers to risk moving forward with planned construction projects,” said Ken Simonson, AGC’s chief economist in the release. “While public sector demand remains solid, it just isn’t enough to offset the private sector pullbacks in activity.”
