Construction spending drops for fourth straight month

Dive Temporary:

• Nonresidential construction spending dropped 0.2% in Might to a seasonally adjusted annual charge of $1.237 trillion, based on an Related Builders and Contractors evaluation launched July 1. 
• Spending fell from the month prior in eight of 16 classes, based on ABC. Non-public nonresidential building fell 0.4% and public nonresidential spending remained unchanged from the month earlier than.
• Many headwinds, similar to excessive rates of interest, a good lending setting, new commerce and immigration insurance policies and common uncertainty could make it a problem for spending to rebound within the second half of 2025, mentioned ABC chief economist Anirban Basu.

Dive Perception:

Might marked the fourth consecutive month of drops, Basu mentioned. Even sturdy markets, similar to manufacturing, have begun to say no from latest peaks. As well as, ABC’s backlog indicator experienced a pointy dip in Might, indicating that contractors have much less work on the books.

“Non-public sector nonresidential exercise stays notably weak and is down practically 7% from its January 2023 peak,” Basu mentioned within the launch. “Manufacturing funding, which elevated greater than 200% in recent times, has begun to fall and is now down greater than 5% since its August 2024 peak. Aside from knowledge facilities, on which spending elevated one other 1% in Might, there are few classes with momentum.”

As well as, Might’s spending was down 3.5% 12 months over 12 months, the largest such decrease since February 2019, based on the Related Normal Contractors of America. 

“Uncertainty about tariffs, tax charges and labor availability are making it exhausting for a lot of builders to danger shifting ahead with deliberate building initiatives,” mentioned Ken Simonson, AGC’s chief economist within the launch. “Whereas public sector demand stays stable, it simply isn’t sufficient to offset the non-public sector pullbacks in exercise.”