Nonresidential construction spending showed little movement heading into late 2025, as a drop in manufacturing-related construction continued to weigh on broader activity across the sector.
According to an Associated Builders and Contractors analysis of U.S. Census Bureau data, overall nonresidential construction spending was flat month over month in October and declined nearly 1% compared to the same time last year.
The report was the first construction spending update released since November because of the government shutdown, and it offered a clearer picture of how nonresidential work was closing out the year: stable at the surface, but softening in key categories.
“Nonresidential construction spending failed to gather momentum at the start of 2025’s third quarter,” Anirban Basu, ABC chief economist, said in the report. “While there are few sources of private nonresidential growth outside of the still surging data center category, much of the recent decline in construction spending is due to a precipitous drop in manufacturing investment.”
.jpg)
Manufacturing construction was the biggest driver behind the month’s decline, dropping 1% in October, ABC reported. Office construction also trended downward, with spending falling 0.4% during the month.
Analysts say the slowdown highlights how quickly one major construction segment can cool after years of heavy investment and strong policy-driven demand.
“With CHIPS Act-enabled megaprojects winding down and the stiff headwind of trade policy, manufacturing construction spending has fallen nearly 10% over the past 12 months,” Basu said in the release.
The latest numbers point to a sharp reversal from the recent period when factory and industrial builds dominated many contractors’ pipelines. Manufacturing construction had been a major opportunity for nonresidential builders, but growing uncertainty, shifting investment priorities, and project completions appear to be reshaping that outlook.
Even as factory and office spending weakened, data center construction continues to stand out as one of the few categories still expanding.
Industry observers say that continued growth reflects the ongoing demand for AI infrastructure, cloud services, and the utility and power work that must accompany large-scale data center development.
Overall, private nonresidential spending decreased 0.2% in October, ABC’s analysis showed — a modest change, but one that continues a broader pattern of slowing growth beyond a few high-demand sectors.
.jpg)
Despite the softness seen in the October spending report, Basu said contractors still see reasons to remain encouraged heading into the first half of 2026.
At the same time, Associated General Contractors of America officials say contractor sentiment has weakened compared to last year, especially across several types of projects outside the data center and power categories.
“Our survey of contractors found widespread expectations of growing demand for data centers and power projects, but expectations are subdued for all other types of projects compared to the 2025 Outlook Survey,” said Ken Simonson, AGC chief economist, said in the release. “On balance, more contractors expect a decline rather than an increase in spending on five project types, compared to just two negative readings a year ago.”
AGC pointed to worsening expectations for schools and lodging projects this year — areas that contractors previously expected would rise in 2025. The organization also noted that outlooks for private office and retail construction weakened further for 2026.
With multiple market sectors cooling, industry leaders are again calling for federal action to create more consistent investment and reduce barriers that slow project delivery.
AGC CEO Jeffrey Shoaf urged Congress to move quickly on passing the next surface transportation bill before current legislation expires later this year. Shoaf also said steps such as reducing red tape could help support stronger construction spending ahead.
Originally reported by Sebastian Obando, Reporter in Construction Dive.
.png)
