Four Straight Months of Constuction Spending in Decline

Nonresidential construction spending declined by 0.2% in May, falling to a seasonally adjusted annual rate of $1.237 trillion, according to an analysis released July 1 by Associated Builders and Contractors (ABC). Of the 16 categories tracked by ABC, spending decreased in eight. Private nonresidential construction dropped 0.4%, while public sector spending remained flat compared to the previous month.

According to ABC chief economist Anirban Basu, persistent challenges—including high interest rates, limited lending, and shifting trade and immigration policies—may hinder a recovery in construction spending during the latter half of 2025.

May marked the fourth straight month of declining spending, Basu noted. Even robust sectors like manufacturing are beginning to retreat from recent highs. ABC’s construction backlog indicator also fell sharply in May, suggesting contractors have fewer projects lined up.

“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.”

According to the Associated General Contractors of America, nonresidential construction spending in May was also 3.5% lower than the same month a year earlier—the steepest annual decline since February 2019.

“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.”

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