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Dive Brief:
- Total construction spending in July fell 0.5% month over month at a seasonally adjusted annual rate of $2.17 trillion, according to a U.S. Census Bureau report released Tuesday.
- Private spending on non-residential construction rose 0.4% month-on-month in July, according to government data. Public spending on construction, meanwhile, fell by 0.2% during this period.
- The monthly increase in non-residential construction spending resulted entirely from data center activityaccording to an analysis of builders and associated contractors. Excluding data centers, non-residential spending fell for a second month in a row to its lowest level since September 2023, said Anirban Basu, ABC’s chief economist.
Diving knowledge:
The data center boom continues in an otherwise soft construction market.
The development of artificial intelligence has fueled demand for electrical projectswhich help cover the electricity needs of data centers. But the growth has made contractors increasingly dependent on the viability of data center construction and boom support projects, Basu said.
“Non-residential activity is even more concentrated given that the power category, which has been driven by data center electricity needs, has also grown substantially over the past year,” Basu said. “This optimistic outlook is increasingly dependent on a single sector.”
The uncertainty is over federal infrastructure funding it has also threatened the momentum in highway construction, according to an analysis by the Associated General Contractors of America. The Employment and Infrastructure Investments Law expires on September 30 and the deadline is approaching contractors were worried about a possible drop in federal funds.
Spending on highway construction fell 0.2% in July month over month, according to data from the Census Bureau.
“Only three categories are driving construction spending: data centers, energy projects and highways,” said Ken Simonson, AGC’s chief economist. “Unfortunately, all of these segments face the risk of cooling off or shrinking due to labor shortages, political pushback, tariffs and a possible expiration of federal funding for highway programs.”
