Delayed Construction Spending Data Shows Impacts of Economic Uncertainty on Demand for Construction Following the Government Shutdown, Tariff Threats, and a Shrinking Labor Market
Construction spending increased 0.2 percent from July to August as a pickup in multifamily residential building outweighed mixed results for private nonresidential categories, according to an analysis of a new government report that the Associated General Contractors of America released today. Association officials noted that the data, which was delayed by the government shutdown, shows the impacts of economic uncertainty on demand for construction.
“Private and public sector construction owners are clearly being impacted by uncertainty about federal funding, material prices, and labor supply,” said Macrina Wilkins, the association’s senior research analyst. “The question is whether the reopening of the government will lead to a future bump in demand for construction.”
Construction spending totaled $2.169 trillion at a seasonally adjusted annual rate in August. That figure is 0.2 percent above the revised July rate and 1.6 percent below the August 2024 level. There were declines in the three largest nonresidential categories. Manufacturing slid 0.9 percent in August. Highway and street and power construction each fell by 0.2 percent for the month. Overall, ten of the sixteen nonresidential categories the Census Bureau reports on posted declines in August.
Private nonresidential spending slipped 0.3 percent for the month and fell 4.0 percent year-over-year. Of the three largest segments, manufacturing construction was down 1.0 percent from July and 8.5 percent lower than in August 2024. Power construction declined 0.2 percent for the month, but rose 2.1 percent year-over-year. Commercial construction (including warehouse, retail, and farm) was unchanged from July but fell by 8.9 percent compared to last year. Spending on data centers, which has been driving much of the recent growth in demand for construction services inched up 0.1 percent in August and 26 percent from one year prior.
Private residential spending increased 0.8 percent in August, but fell 2.0 percent compared to August 2024. Single-family homebuilding edged down 0.4 percent and 1.1 percent, respectively. Multifamily construction was up 0.2 percent in August but declined 7.1 percent from a year earlier.
Public construction spending remained flat for the month but rose 2.7 percent over 12 months. Among the top three largest segments, highway and street construction slipped 0.2 percent and 0.8 percent respectively, education construction inched up 0.6 percent for the month but fell 0.9 percent, and transportation spending declined by 0.5 percent in August but increased 8.0 percent from a year earlier.
Association officials continued to urge the administration to resolve outstanding trade disputes with countries like Canada and Mexico to provide more certainty about expected tariff levels. They added that the administration has taken a number of steps to shrink the labor market, which is contributing to higher labor costs and greater construction schedule uncertainty for the industry. They said that added with the worries about what was then a pending government shutdown, those factors likely contributed to the slowdown in demand.
“With the government shutdown over the administration continuing to resolve trade disputes, now is the time to focus on expanding the construction workforce,” said Jeffrey D. Shoaf, the association’s chief executive officer. “Federal officials can do that by passing the Dignity and Essential Workers for Economic Advancement Acts and boosting funding for career and technical education.”