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.

U.S. Construction Spending Sees a Minor Dip in July

In July, spending on construction projects across the United States decreased by 0.1% compared to June, totaling approximately $2.14 trillion on a seasonally adjusted annual rate. This decline can be primarily attributed to lowered expenditures in the areas of private nonresidential and multifamily construction. These reductions outweighed the slight increases observed in single-family homebuilding and public infrastructure spending.

According to recent research, 16% of contractors reported that their projects were either canceled, deferred, or scaled back. The primary reason for these changes was linked to fluctuations in demand related to tariffs imposed on certain construction materials. Furthermore, labor shortages are causing significant delays, impacting 45% of firms surveyed. Additionally, 26% of contractors have seen project impacts due to changing policies, such as federal funding, tax regulations, and other legislative changes.

Insights into Construction Spending Categories

The data shows a marked decline in private nonresidential construction, with spending down 3.7% over the past year. Conversely, public nonresidential spending has seen a 3.1% increase year-over-year, suggesting a shift in focus toward publicly funded projects. In specific sectors, commercial construction spending dipped by 0.9%, while manufacturing and private power construction saw declines of 0.7% each. Additionally, multifamily projects experienced a decrease of 0.4%.

On a more positive note, the single-family homebuilding sector saw a slight increase of 0.1% in spending during July. However, signals from the overall market indicate potential complications ahead. New residential construction permits actually fell in July, despite a hike in new building starts, suggesting upcoming challenges for future spending in this sector.

Architectural Activity Shows Signs of Weakness

The American Institute of Architects (AIA) reported a billings index score of 46.3 for July, highlighting a decrease in billing activity for architectural firms. The score remaining below 50 for 31 out of the past 34 months indicates a soft business environment that is likely affecting planning for future construction projects. Economic experts predict that the construction industry may face a challenging second half of the year, with the possibility of further declines in activity.

Overall, construction spending has declined by 2.8% year-over-year compared to July 2024. Moreover, new home sales dropped sharply by 8.2% compared to the same month last year, which further complements the narrative of reduced market activity and challenges facing the construction industry. The S&P CoreLogic Case-Shiller Index also indicated a slower increase in national home prices, which rose by only 1.9%, marking the slowest growth since summer 2023.

Conclusion

As construction spending continues on a downward trajectory, industry analysts stress the importance of achieving policy stability to foster new construction. Labor shortages, coupled with the impacts of tariffs, remain significant obstacles that developers and contractors must navigate. The future remains uncertain for many firms in the construction landscape, suggesting that strategic adjustments might be necessary to adapt to this evolving economic environment.

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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