Private Nonresidential Investment and Homebuilding Decline as Uncertainty over Tariffs and Trade Friction Keeps Contractors and Owners Guessing about Costs and Demand for Upcoming Projects
Construction spending fell for the third month in a row in April, declining 0.4 percent from March and 0.5 percent from a year earlier—the first year-over-year decrease since April 2019, according to an analysis by the Associated General Contractors of America of a new government report. Association officials warned that the decline in construction activity risks making the nation less competitive and will hurt economic growth.
“A pullback in many types of private nonresidential projects, as well as a sharp drop in homebuilding, contributed to the latest drop in construction spending,” said, Ken Simonson, chief economist of the Associated General Contractors of America. “Ever-changing announcements about tariffs on key construction inputs, along with potential retaliatory measures by U.S. trading partners, are making owners hesitant to commit to new projects.”
Spending totaled $2.15 trillion at a seasonally adjusted annual rate in April, 0.4 percent below a downwardly revised March rate and 0.5 percent less than in April 2024. The decline followed decreases of 0.8 percent in March and 0.7 percent in February.
Private nonresidential construction shrank 0.5 percent for the month. The year-over-year increase of 1.0 percent was the smallest since July 2021. Spending on the largest private segment, manufacturing plants, slipped 0.6 percent in April. Private power construction spending fell 0.7 percent. Commercial construction—warehouse, retail, and farm projects, declined 1.0 percent.
Private residential construction slid 0.9 percent for the month and 4.8 percent from April 2024. Single-family homebuilding slumped 1.1 percent and spending on improvements to owner-occupied homes fell 0.8 percent. Multifamily construction inched down 0.1 percent.
Public construction increases softened the overall decline. Public spending climbed 0.4 percent from March and 5.5 percent from April 2024. Of the three largest public construction categories, highway and street construction rose 0.5 percent in April, spending on educational structures edged down 0.1 percent, and spending on transportation facilities rose 0.7 percent.
Association officials said that the frequent changes in announced tariffs were making it difficult for owners and contractors to know what the cost of projects would be, while countermeasures by U.S. trading partners and a drop in foreign visitors were causing owners to postpone or cancel new projects. They urged the administration to avoid tariffs on key construction inputs such as steel, aluminum, and lumber.
“Unless contractors and investors have greater certainty about what costs and demand to expect, private construction is likely to continue declining,” said Jeffrey D. Shoaf, the association’s chief executive officer. “That will make the U.S. less competitive and damage the prospects for economic growth.”