National nonresidential construction spending fell 0.2 percent in August to a seasonally adjusted annual rate of $1.24 trillion, according to an Associated Builders and Contractors analysis of newly released U.S. Census Bureau data.
The drop is the third in four months and continues a gradual cooling from peaks in early 2024, when a wave of semiconductor, battery and clean energy megaprojects pushed non-residential spending to record levels before they were set.
Private non-residential spending declined 0.3% in August and was down 4.0% year-on-year, while non-residential public employment fell 0.1% for the month but is still up 2.4% year-on-year. Total construction spending was nearly flat at $2.17 trillion.
Census data analyzed by Associated Builders and Contractors showed that non-residential construction spending fell 0.2% in August to $1.24 trillion, with manufacturing down 0.9% for the month and 8.2% year-over-year as the sector continues to cool after its recent surge in megaprojects.
Sectoral analysis
Sector-wide results were mixed, with manufacturing posting the biggest drop, down 0.9% in August and 8.2% from a year earlier, the steepest annual decline of any non-residential category, as the megaproject cycle that drove growth in 2022-2024 continues to unwind.
Commercial construction declined 0.1% for the month and 7.5% year-on-year, while office construction fell 0.4% in August. Lodging was down 0.4% for the month and 1.7% year-on-year. Wastewater and waste disposal fell 0.7% in August.
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Several categories of customer service improved. Spending on roads and streets increased 0.2% for the month, reflecting continued federal formula funding under the Infrastructure Jobs and Investment Act.
Water supply construction rose 0.4% in August and 2.3% year-on-year. Education spending increased by 0.7% during the month.
Public safety, conservation and development, and water-related segments posted year-over-year gains. The religious category was up 20.8% year-on-year, albeit from a relatively small base.
ENR’s latest third-quarter cost report examines current economic pressures on construction, including slowing non-residential spending and changing material trends.
“Non-residential construction spending contracted for the third time in the past four months in August and is now down 1.5% year-on-year,” ABC chief economist Anirban Basu said, noting that weakness remains concentrated in manufacturing and commercial work.
Conversely, data centers continue to outperform. Basu said about one in seven CBA members are currently under contract to build data centers and are reporting higher backlog levels than those not in that job.
Basu added that the August figures predate the impacts of the extended federal government shutdown that began in September, as well as cost-surge tariffs that went into effect Aug. 1.
“With private non-residential activity straining under the weight of high borrowing costs, unusually high uncertainty and rising materials costs, a slowdown in public sector work could lead to particularly difficult quarters for the industry,” he said.
Despite the recent reduction, long-term spending data from the Census shows that nonresidential construction remains substantially above pre-2022 levels, underscoring how megaproject and data center activity expanded the market dramatically over the past three years.
As agencies work through shutdown-related delays and contractors assess the impacts of rates and interest rate conditions, spending performance in the final quarter of 2025 will indicate whether the current slowdown stabilizes or deepens.
