Building activity softened in May as the impacts of tariffs and project delays rippled through contractors’ pipelines, according to the latest economic data.

A modestly stable backlog and a drop in energy costs offered some relief, but apart from data centers, momentum cooled across core construction sectors. Planning for new projects weakened, and total construction starts plunged by 9%, with steep declines noted in both infrastructure and commercial groundbreakings. Private nonresidential investment dropped for the third time in four months, even as public funding continued to bolster transportation and utilities work reddit.com+12constructiondive.com+12constructiondive.com+12constructiondive.com+1dailyreporter.com+1.

“Contractors reported rising cancellation rates tied to tariffs,” the report said, “even as many firms remained optimistic about profit margins and future staffing.” Indeed, labor data showed limited movement in job openings or turnover, with firms holding onto existing staff while pulling back on new hires amid ongoing uncertainty.

Amid the slowdown, data center projects stood out as a bright spot, driving most of the growth in planning and helping sustain some commercial activity local478.org+2constructionowners.com+2viewpoint.com+2. However, economists caution that this might be a temporary reprieve.

Tariff-driven price increases added pressure on project budgets. Construction input prices jumped, especially in January as many contractors rushed to front-load material purchases ahead of expected tariff hikes precisionhomeremodeling.com+2iuoe478-public.alpha.polardesign.com+2constructiondive.com+2.

Overall, contractors are facing a complex environment—balancing existing project pipelines with rising material costs and growing uncertainty. However, there’s a cautious optimism: despite a chill in new starts, “many firms remained optimistic about profit margins and future staffing.”

Originally reported by Sebastian Obando in Construction Dive.