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Dive brief:
- Non-residential construction spending fell 0.2% in August to a seasonally adjusted annual rate of $1.24 trillion, according to data from the US Census Bureau.
- Private and public non-residential spending fell 0.3% and 0.1% respectively, the report said. Ten of the 16 non-residential categories recorded monthly declines, led by the fall in manufacturing construction spendingaccording to Associated Builders and Contractors.
- The weakness marks the third monthly contraction in four months, leaving non-residential construction spending down 1.5 percent year-on-year, said Anirban Basu, ABC chief economist.
Diving knowledge:
The August spending report, originally scheduled for release on October 1 before the government shutdown caused a delay, showed what most contractors expected: more contraction.
This included a continuation tension in the main segments out of the data center boom, said Macrina Wilkins, senior research analyst at Associated General Contractors of America. Three of the largest non-residential segments posted declines in August, according to spending data.
“Public and private sector construction owners clearly are affected by uncertainty On federal funding, material prices and labor supply,” Wilkins said in the statement. “The question is whether reopening the government will lead to a future increase in construction demand.”
Manufacturing construction spending, for example, fell 0.9% in August and is now 8.2% lower through August compared to last year. Commercial construction also fell in August, down 0.1%, and followed the pace of spending last year through August by 7.5%, according to ABC analysis.
“Manufacturing and commercial categories have been particularly weak in 2025, while momentum remains confined almost exclusively to the data center segment,” Basu said in the statement. “This should come as no surprise, as approximately 1 in 7 CBA members are contracted to work in a data center, and these contractors have a significantly higher backlog than those who are not.”
This makes the industry increasingly dependent on data center work to offset softness elsewhere. Any easing of financing conditions or general economic clarity could help stabilize activity, Basu added.
“Of course, this data is for August and does not reflect either the effects of the government shutdown or the potential for increased costs from the tariffs that were implemented earlier in the month,” Basu said. “With private non-residential activity dampening under the weight of high borrowing costs, extraordinarily high uncertainty and rising materials costs, a slowdown in public sector work could lead to particularly difficult quarters for the industry.”
