Public construction provides limited lift while private projects face increasing headwinds

U.S. nonresidential construction spending continued its downward trend in April, dipping 0.1% to a seasonally adjusted annual rate of $1.248 trillion, according to an analysis of U.S. Census Bureau data released Monday by Associated Builders and Contractors (ABC). The overall dip, though slight, marks the second consecutive monthly decline and reflects the compounding effects of inflation, high interest rates, trade policy uncertainty, and tighter lending conditions.

Spending declined in six of the 16 tracked nonresidential subcategories. Notably, private nonresidential construction spending dropped 0.5%, while public nonresidential construction rose 0.5%, continuing a trend of the public sector shouldering more of the industry’s momentum, according to the report.

Anirban Basu, chief economist at ABC, said policy-related risks continue to cloud the construction outlook. “Construction spending slipped in April as headwinds like trade policy uncertainty, high interest rates and tight lending standards continued to batter industrywide momentum,” he noted. “Contractors reported tariff-related project delays or cancellations in April, and despite changes to certain import tax rates in May, policy uncertainty remains extraordinarily elevated.”

Basu pointed to the broader trend of softening private investment as a critical concern. “Private nonresidential investment has now fallen in three of the first four months of 2025, and is on pace for a 4% annual decline,” he said, comparing it to a 2.3% gain in private construction in 2024.

A significant portion of the slowdown can be traced to lingering trade tensions. ABC reported that nearly 22% of contractors have experienced delays or outright cancellations tied to tariff-related disruptions. “After years of trying to plan around supply chain shocks, contractors are now grappling with economic and policy instability that makes forecasting extremely difficult,” Basu added.

A separate analysis from the Associated General Contractors of America (AGC) highlighted how these forces are deterring private sector commitments, especially in nonresidential segments. “A pullback in many types of private nonresidential projects, as well as a sharp drop in homebuilding, contributed to the latest drop in construction spending,” said AGC Chief Economist Ken Simonson. “Ever-changing announcements about tariffs on key construction inputs, along with potential retaliatory measures by U.S. trading partners, are making owners hesitant to commit to new projects.”

Certain categories once seen as construction drivers are now showing signs of weakness. According to ABC, computer and electronic manufacturing construction dropped nearly 10% year-over-year, a notable reversal after the sector served as a major source of growth in prior quarters.

Still, there are some bright spots. Public sector spending, especially on transportation and infrastructure, helped offset the private sector decline. Public nonresidential spending increased 0.5% in April and is up 5.6% year over year, bolstered by ongoing investments in highways, street improvements, and public transit. Educational construction, however, remained flat.

Data centers and select infrastructure projects remain among the few reliable performers in the private sector. These projects tend to be less sensitive to short-term financial fluctuations and benefit from long-term demand, particularly in technology and logistics.

Despite the resilience in public spebnding, industry leaders are calling for greater policy clarity to help stabilize private investment. “Unless contractors and investors have greater certainty about what costs and demand to expect, private construction is likely to continue declining,” said AGC CEO Jeffrey Shoaf. “That will make the U.S. less competitive and damage the prospects for economic growth.”

As Congress and the Biden administration consider changes to tariffs and industrial policy, construction groups are urging a coordinated effort to stabilize prices and improve financing access. Without such steps, experts warn that project cancellations could become more common, and the sector’s recovery could be delayed well into 2026.

Originally reported by Sebastian Obando in Construction Dive.