U.S. Construction Spending Declines Amid Economic Challenges

United States, September 4, 2025

News Summary

Construction spending in the U.S. decreased by 0.1% in July, totaling an annualized rate of $2.14 trillion. This decline is driven by reduced investment in private nonresidential and multifamily projects, compounded by labor shortages and tariff impacts. While public nonresidential spending increased, single-family home construction showed only a slight uptick. Experts predict ongoing challenges for the industry as new residential construction permits drop, reflecting a softening market with significant hurdles ahead.

Construction Spending Dips in July Due to Various Challenges

Spending on construction projects in the United States saw a slight decrease of 0.1% in July, totaling $2.14 trillion when adjusted for seasonal rates. This downturn highlights significant challenges facing the construction industry, including labor shortages and the impacts of tariffs.

The primary cause of this spending reduction stems from declines in private nonresidential and multifamily construction, which offset any gains made in single-family homebuilding and public infrastructure investments. The private nonresidential sector alone experienced a year-over-year drop of 3.7%.

Key Areas of Spending Change

According to recent data, July also witnessed a 0.9% decline in commercial construction spending, while both manufacturing and private power construction fell by 0.7%. Additionally, multifamily construction projects saw a slight reduction of 0.4%. In contrast, single-family homebuilding experienced a modest increase of 0.1%.

The construction sector is facing ongoing challenges that are affecting its growth. A survey conducted by the Associated General Contractors of America revealed that 16% of contractors had to cancel, defer, or scale back projects due to fluctuating demand influenced by tariff changes. Additionally, labor shortages were a significant concern, with 45% of firms reporting delays attributable to insufficient labor availability. Another 26% indicated that changes in federal funding, taxes, and regulations were impacting projects.

Challenges Ahead for the Construction Industry

The American Institute of Architects reported a billings index score of 46.3 for July, suggesting a decline in billing activity for architecture firms. The Architectural Billings Index (ABI) has been below 50 for 31 out of the past 34 months. Such figures signal a soft business environment that may hinder future growth in construction.

According to industry analysts, the current downward trend may persist, with potential further declines anticipated in the second half of the year. The construction industry is already feeling the effects, as new residential construction permits dropped while new builds increased, indicating potential challenges for future spending.

In terms of sales activity, new home sales experienced a notable drop of 8.2% in July compared to the same month last year. The S&P CoreLogic Case-Shiller Index reported a year-over-year increase of 1.9% in national home prices, marking the slowest growth observed since summer 2023. Overall construction spending has decreased by 2.8% compared to July 2024, positioning the industry in a cautious state.

Future Implications

Industry experts emphasize the need for policy certainty to stimulate new construction activity, as tariffs and labor shortages continue to challenge project viability. Without a clear outlook and support, the potential for a sustained recovery remains uncertain, leaving many in the construction sector to navigate a complex landscape as they move into the latter parts of the year.

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Additional Resources

• Construction Dive
• Tri-Cities Business News
• Business Record
• Quartz
• MDM
• Wikipedia: Construction Industry
• Google Search: U.S. construction spending
• Google Scholar: Construction spending
• Encyclopedia Britannica: Construction
• Google News: Construction spending July 2025