Current construction landscape reflecting economic headwinds.
United States, September 4, 2025
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.
In July, construction spending in the United States slightly decreased by 0.1% compared to June, bringing the total to $2.14 trillion when adjusted for seasonal fluctuations. This decline primarily stemmed from reduced expenditures in private nonresidential and multifamily construction, which overshadowed modest gains in single-family homebuilding and funding for public infrastructure projects.
The news comes amid a turbulent landscape for the construction sector, marked by labor shortages and the lingering effects of tariffs. A recent survey conducted by the Associated General Contractors of America (AGC) revealed that 16% of contractors faced cancellations, delays, or reductions in projects due to fluctuating demand linked to tariff policies. Additionally, 45% of firms reported that labor shortages contributed to project delays, indicating a considerable impact on the overall workflow in the industry.
Breaking down the statistics further, spending on private nonresidential construction decreased by 3.7% over the past year, signaling a tough market for commercial projects. Meanwhile, investments in public nonresidential construction showed resilience, rising by 3.1% year-over-year. Notably, commercial construction spending fell by 0.9% in July, along with manufacturing and private power construction experiencing a setback of 0.7%. Furthermore, multifamily projects also saw a decrease of 0.4%.
In contrast, single-family home construction experienced a slight upward trend, with spending rising by 0.1%. However, overall construction spending shows signs of struggle when viewed over a broader timeline, with expenditures down by 2.8% when compared to the previous year.
The AGC has underscored the necessity for policy certainty to stimulate new construction efforts. High tariff rates and persistent labor shortages have significantly hindered project feasibility, making it challenging for contractors to plan ahead. Moreover, the American Institute of Architects (AIA) reported a concerning billings index score of 46.3 for July. Scores below 50 indicate a decline in billing activity, and this score has remained under 50 for 31 out of the past 34 months, hinting at a softening business climate for architecture firms.
According to AGC’s chief economist, the downward trend has been consistent, with no private segments showing signs of momentum as we approach the end of 2025. The construction industry faces a challenging second half of the year, with the potential for further activity declines.
Amidst these challenges, July also saw a decline in new residential construction permits, raising further concerns about future spending in the industry. While the starting of new builds increased, suggesting some optimism, the overall future remains uncertain. The decline in new home sales by 8.2% in July compared to the same month last year reflects reduced market activity, indicating additional pressure on the construction market.
While the S&P CoreLogic Case-Shiller Index showed a year-over-year increase in national home prices by 1.9%, this is the slowest growth observed since the summer of 2023, further complicating the landscape for prospective buyers and builders alike.
The recent dip in construction spending is primarily attributed to decreases in private nonresidential and multifamily construction, coupled with labor shortages and tariff-related challenges which have led to project cancellations and delays.
In July, construction spending saw a slight decrease of 0.1% compared to June. Trends over the past year indicate an overall spending reduction of 2.8% compared to the same month last year.
While overall spending has dipped, public nonresidential construction saw a year-over-year increase of 3.1%, and single-family homebuilding experienced a minor rise of 0.1% in July.
Dutch Kills, Long Island City, Queens, September 4, 2025 News Summary A $23.15 million first mortgage…
Skyland, Washington, D.C. (Ward 8), September 4, 2025 News Summary The District of Columbia Housing Finance…
United States, September 4, 2025 News Summary A nationwide private lender has increased leverage in its…
Toronto, September 4, 2025 News Summary The city's flagship film festival marked its 50th edition while…
Global, September 4, 2025 News Summary The polyisocyanurate insulation market is projected to grow significantly, from…
Missoula, September 4, 2025 News Summary The City of Missoula has temporarily halted the review of…